Surge in Open Interest Signals Shifting Market Sentiment for Oil & Natural Gas Corporation Ltd.

Open Interest and Volume Dynamics

On 2 Feb 2026, ONGC's open interest in derivatives rose sharply to 89,325 contracts from 77,595 the previous session, marking an increase of 11,730 contracts or 15.12%. This expansion in OI was accompanied by a volume of 62,104 contracts, indicating heightened trading activity. The futures value stood at ₹43,736.64 lakhs, while options contributed a substantial ₹32,389.70 crores, culminating in a total derivatives value of approximately ₹48,483.14 lakhs.

The underlying stock price closed at ₹252, slightly down by 0.14% on the day, underperforming its sector by 2.46%. However, the stock has shown signs of a trend reversal, gaining after two consecutive days of decline. Notably, ONGC's price remains above its 20-day, 50-day, 100-day, and 200-day moving averages, though it trades below the 5-day moving average, signalling short-term consolidation amid longer-term strength.

Market Positioning and Sentiment Shifts

The surge in open interest, coupled with elevated volumes, suggests that market participants are actively repositioning. The increase in OI typically indicates fresh capital entering the market, either through new long or short positions. Given ONGC's recent price underperformance relative to the Oil Exploration/Refineries sector—which gained 2.37%—investors may be anticipating a potential rebound or hedging against further volatility.

Delivery volumes have declined by 25.77% compared to the five-day average, with a delivery volume of 1.28 crore shares on 30 Jan 2026. This drop in investor participation at the delivery level contrasts with the rising derivatives activity, implying that traders are increasingly favouring derivatives for speculative or hedging purposes rather than outright stock accumulation.

Technical and Fundamental Context

ONGC's current Mojo Score stands at 58.0 with a Mojo Grade of Hold, downgraded from Buy on 19 Jan 2026. This reflects a cautious stance amid mixed signals from price action and sector performance. The company holds a Market Cap Grade of 1, underscoring its status as a large-cap heavyweight with a market capitalisation of ₹3,18,155 crore.

Despite the recent downgrade, ONGC offers a high dividend yield of 4.91%, which remains attractive for income-focused investors. Liquidity remains robust, with the stock capable of supporting trade sizes up to ₹20.5 crore based on 2% of the five-day average traded value, ensuring ease of entry and exit for institutional and retail participants alike.

Directional Bets and Derivatives Positioning

The increase in open interest and volume in derivatives points to a complex interplay of directional bets. The futures market value of ₹43,736.64 lakhs suggests significant long or short positioning, while the options market's massive ₹32,389.70 crore valuation indicates active hedging and speculative strategies.

Given the stock's recent underperformance relative to its sector and the broader Sensex (which gained 0.52% on the same day), traders may be positioning for a potential sector-led recovery or protecting gains through options strategies. The divergence between short-term moving averages and longer-term averages further supports the notion of a market in transition, with participants weighing risks and opportunities carefully.

Sectoral and Market Implications

The Oil Exploration/Refineries sector has gained 2.37% on the day, outperforming ONGC's marginal decline. This divergence may reflect company-specific factors or profit-taking after recent gains. However, the sector's strength could eventually buoy ONGC, especially if global oil prices remain stable or improve.

Investors should monitor open interest trends closely, as sustained increases often precede significant price moves. The current OI surge in ONGC's derivatives may signal an impending directional breakout or increased volatility, warranting close attention from traders and portfolio managers.

Investor Takeaways and Outlook

For investors, the recent surge in derivatives open interest in ONGC highlights a pivotal moment. While the stock currently trades below its short-term moving average, its position above longer-term averages and the sector's positive momentum suggest potential for recovery. The high dividend yield adds an income cushion amid price fluctuations.

However, the downgrade from Buy to Hold and the underperformance relative to the sector caution against aggressive accumulation at this stage. Market participants should watch for confirmation of trend direction through sustained price and volume action, as well as further changes in open interest.

In the derivatives space, the elevated futures and options values indicate active hedging and speculative interest, which could amplify price swings in the near term. Traders may consider strategies that balance risk and reward, such as spreads or collars, to navigate the evolving landscape.

Overall, ONGC remains a key bellwether in the oil sector, and its derivatives activity provides valuable insight into market sentiment and positioning. Close monitoring of open interest trends, volume patterns, and sector developments will be essential for informed decision-making.

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