Tata Consultancy Services Sees Sharp Open Interest Surge Amid Market Downturn

Open Interest and Volume Dynamics

The latest data reveals that TCS's open interest (OI) in derivatives rose from 205,340 contracts to 236,605 contracts, an increase of 31,265 contracts. This 15.23% jump in OI accompanied a daily traded volume of 126,216 contracts, indicating robust participation in the stock’s futures and options market. The futures value stood at ₹11,218.27 crores, while the options segment exhibited an enormous notional value of approximately ₹5,85,459.89 crores, culminating in a total derivatives value of ₹11,940.82 crores.

Such a surge in OI alongside substantial volume typically reflects fresh capital entering the market or existing participants increasing their exposure. This is particularly significant given the backdrop of TCS’s share price retreating sharply by 5.42% on the day, underperforming the IT - Software sector’s decline of 4.96% and contrasting with the Sensex’s modest gain of 0.23%.

Price Action and Moving Averages

TCS opened the trading session with a gap down of 3.26%, hitting an intraday low of ₹3,031.20, which represents a 6.02% drop from the previous close. The weighted average price for the day was skewed towards the lower end of the range, suggesting that most volume was transacted near the lows. Furthermore, the stock is trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating a sustained bearish momentum.

Investor sentiment appears cautious as the stock’s technical indicators deteriorate, with the downward pressure compounded by the broader sector weakness. Despite this, delivery volumes have risen sharply, with 26.5 lakh shares delivered on 3 February, marking a 24.49% increase over the five-day average delivery volume. This suggests that while short-term traders may be exiting, longer-term investors could be accumulating at lower levels.

Market Positioning and Directional Bets

The sharp increase in open interest amid falling prices suggests that market participants are actively repositioning. Typically, rising OI with declining prices can indicate that fresh short positions are being built, or that existing longs are being liquidated. However, the simultaneous rise in delivery volumes hints at a more nuanced scenario where some investors may be taking advantage of the dip to accumulate shares for the long term.

Given TCS’s current Mojo Score of 57.0 and a Mojo Grade upgrade from Sell to Hold as of 22 April 2025, the stock is in a transitional phase. The upgrade reflects improving fundamentals or valuation metrics, but the Hold rating signals caution amid prevailing uncertainties. The company’s market capitalisation remains robust at ₹11,07,134.78 crores, underscoring its large-cap status and liquidity, which supports active derivatives trading.

Sectoral and Broader Market Context

The IT - Software sector has been under pressure, with a 4.96% decline on the day, reflecting concerns over global demand and margin pressures. TCS’s underperformance relative to its sector peers and the broader Sensex suggests company-specific factors or profit-taking may be at play. The stock’s dividend yield of 3.38% remains attractive, potentially providing a cushion for long-term investors amid volatility.

Liquidity metrics indicate that TCS is sufficiently liquid to support sizeable trades, with the stock’s average traded value allowing for trade sizes up to ₹20.73 crores without significant market impact. This liquidity is critical for institutional investors and derivatives traders alike, facilitating efficient price discovery and risk management.

Implications for Investors

Investors should carefully analyse the evolving derivatives activity in TCS. The surge in open interest amid a price decline may present both risks and opportunities. Short-term traders might interpret the data as a bearish signal, potentially increasing short exposure or hedging existing positions. Conversely, long-term investors could view the increased delivery volumes and attractive dividend yield as reasons to accumulate on weakness.

Technical indicators suggest caution, with the stock trading below all major moving averages, signalling a downtrend. However, the recent upgrade in Mojo Grade from Sell to Hold indicates that the company’s fundamentals may be stabilising, warranting close monitoring for signs of a reversal or consolidation.

Outlook and Conclusion

Tata Consultancy Services Ltd. is currently navigating a challenging phase marked by sectoral headwinds and market volatility. The significant rise in derivatives open interest highlights active repositioning by market participants, reflecting divergent views on the stock’s near-term trajectory. While the price action and technicals point to bearish momentum, the underlying fundamentals and increased delivery volumes suggest that some investors are positioning for a potential recovery.

Given the stock’s large-cap stature, liquidity, and dividend yield, it remains a key bellwether in the IT sector. Investors should weigh the mixed signals carefully, balancing short-term risks against longer-term value prospects. Monitoring open interest trends alongside price and volume patterns will be crucial in assessing the evolving market sentiment towards TCS.

Summary of Key Metrics:

• Open Interest: 236,605 contracts (+15.23%)
• Volume: 126,216 contracts
• Futures Value: ₹11,218.27 crores
• Options Value: ₹5,85,459.89 crores
• Price Change: -5.42% on 4 Feb 2026
• Dividend Yield: 3.38%
• Mojo Score: 57.0 (Hold, upgraded from Sell)
• Market Cap: ₹11,07,134.78 crores

Investors and traders should continue to monitor TCS’s derivatives activity and price action closely, as these indicators provide valuable insights into market positioning and potential directional bets in one of India’s largest IT companies.

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