Open Interest and Volume Dynamics
On 29 Dec 2025, Tata Steel Ltd’s open interest (OI) in futures and options contracts rose sharply to 1,03,858 contracts, up 13.32% from the previous 91,648 contracts. This increase of 12,210 contracts indicates a substantial build-up of positions by market participants. The daily volume also remained robust at 1,16,389 contracts, supporting the elevated OI levels and suggesting sustained trading interest.
The futures value stood at ₹1,73,617.94 lakhs, while the options segment exhibited an enormous notional value of approximately ₹95,779.35 crores, underscoring the significant liquidity and hedging activity in Tata Steel’s derivatives market. The combined total derivatives value was ₹1,83,798.96 lakhs, reflecting the stock’s prominence among large-cap ferrous metals players.
Price Performance and Technical Positioning
Tata Steel’s underlying share price closed at ₹173, having touched an intraday high of ₹174.13, marking a 2.96% gain on the day. This performance outpaced the ferrous metals sector’s 1.64% rise and the Sensex’s marginal decline of 0.26%, signalling relative strength. The stock has reversed its short-term downtrend after two consecutive days of losses, suggesting a potential trend reversal.
Technically, Tata Steel is trading above its key moving averages – 5-day, 20-day, 50-day, 100-day, and 200-day – indicating a strong bullish bias. Such positioning often attracts momentum traders and institutional investors, further amplifying open interest and volume.
Market Positioning and Investor Behaviour
The surge in open interest alongside rising prices typically points to fresh long positions being established, reflecting bullish sentiment. However, the delivery volume on 26 Dec was 89.71 lakh shares, down 23.76% against the five-day average, indicating a slight dip in investor participation in the cash segment. This divergence suggests that while derivatives traders are aggressively positioning, some retail investors may be cautious or profit-booking.
Liquidity remains adequate, with the stock’s average traded value supporting trade sizes up to ₹7.43 crore, ensuring smooth execution for large orders without significant price impact. This liquidity is crucial for institutional players who often drive open interest changes.
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Fundamental and Sector Context
Tata Steel Ltd, a large-cap ferrous metals company with a market capitalisation of ₹2,16,527 crore, has recently been upgraded by MarketsMOJO from a Hold to a Buy rating, reflecting improved fundamentals and growth prospects. The Mojo Score of 77.0 and a Market Cap Grade of 1 further reinforce the stock’s quality and investment appeal.
The ferrous metals sector has been experiencing mixed trends globally, with steel demand showing signs of recovery amid infrastructure spending and industrial activity. Tata Steel’s ability to outperform its sector peers by 1.27% on the day highlights its relative strength and potential to capitalise on sector tailwinds.
Directional Bets and Derivatives Strategy
The 13.32% increase in open interest, coupled with a 2.54% day change in price, suggests that market participants are positioning for further upside. The rising OI alongside price gains typically indicates fresh buying rather than short covering. This is corroborated by the stock’s trading above all major moving averages, signalling a bullish technical setup.
Options market activity, with a notional value exceeding ₹95,779 crore, points to active hedging and speculative strategies. Traders may be employing call options to leverage upside potential or protective puts to manage risk amid volatility. The substantial futures value also indicates that institutional investors are likely increasing their exposure through outright long positions or spread strategies.
Risks and Considerations
Despite the positive signals, investors should remain cautious of potential volatility given the recent dip in delivery volumes, which may reflect some profit-taking or uncertainty among retail investors. Additionally, global steel prices and raw material costs remain susceptible to geopolitical and economic developments, which could impact Tata Steel’s margins and stock performance.
Monitoring open interest trends in conjunction with price action and volume will be critical to gauge the sustainability of the current bullish momentum. A sustained increase in delivery volumes alongside rising prices would confirm stronger investor conviction.
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Outlook and Investor Takeaway
With Tata Steel Ltd’s recent upgrade to a Buy rating and a strong Mojo Score of 77.0, the stock is well positioned to benefit from improving sector fundamentals and positive technical momentum. The surge in open interest and volume in derivatives markets indicates growing conviction among traders and investors about the stock’s upside potential.
Investors should watch for confirmation through sustained price appreciation and increasing delivery volumes to validate the bullish thesis. Given the stock’s liquidity and large-cap status, it remains an attractive option for both institutional and retail investors seeking exposure to the ferrous metals sector.
However, prudent risk management is advised given the inherent volatility in commodity-linked stocks and the possibility of short-term corrections.
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