Information technology stocks advanced in the derivatives market, but traders were not positioning for the move in the same way across the sector. Tech Mahindra saw fresh long buildup as its futures price and open interest rose together, while gains in TCS, Infosys, HCLTech and Wipro came alongside a decline in open interest, indicating short covering.
Tech Mahindra's Aug. 25 futures rose 2.30% to Rs 1,675, while open interest increased 9.86%. The combination of higher prices and rising open interest indicates traders added fresh long positions in the stock.
TCS, Infosys and HCLTech futures gained between 1% and 2%, but open interest declined in each contract. The setup indicates traders were closing existing short positions rather than adding fresh longs.
The divergence makes Tech Mahindra stand out among the large IT stocks in the available F&O data, even as the broader sector moved higher.
Open interest measures outstanding derivatives contracts that have not been closed or settled. Rising prices with increasing open interest indicate long buildup, while rising prices accompanied by declining open interest indicate short covering.
ALSO READ: Kalyan Jewellers Shares Jump Over 3% — What F&O Traders Are Doing
TechM Sees Longs
Tech Mahindra's August futures gained Rs 37.70 to Rs 1,675, up 2.30%. Open interest rose 9.86% during the move.
The contract traded at a discount to the underlying stock, with the basis at minus Rs 3.
A rise in futures price accompanied by an increase in open interest is classified as long buildup, indicating fresh bullish positions were added to the contract.
Tech Mahindra's increase in open interest was also larger than that seen across the other major IT stocks in the data.
ALSO READ: Bank Nifty Today: 58,000 Emerges As Key F&O Battleground — Key Levels To Watch
Shorts Cover Elsewhere
TCS August futures rose 2.06%, or Rs 49.10, to Rs 2,435.90. Open interest, however, declined 0.17%. The contract's basis stood at Rs 6.
HCLTech futures advanced 1.94% to Rs 1,371.20, while open interest fell 0.09%. Its basis stood at Rs 6.90.
Infosys futures gained 1.08% to Rs 1,187.70, accompanied by a 0.24% decline in open interest. The contract traded at a premium of Rs 7.30 to the underlying stock.
Wipro futures rose 0.91% to Rs 188.40, while open interest declined 0.26%.
The combination of rising futures prices and falling open interest indicates short covering in TCS, HCLTech, Infosys and Wipro.
Coforge showed a similar setup. Its August futures climbed 1.14% to Rs 1,806, while open interest declined 0.08%. KPIT Technologies futures rose 1.46% to Rs 630.35 as open interest fell 0.12%.
IT F&O Setup
The F&O positioning shows that the rally across IT stocks is coming from two different sets of trades.
Tech Mahindra is seeing fresh long buildup, with both price and open interest increasing. TCS, Infosys, HCLTech, Wipro, Coforge and KPIT Technologies are seeing short covering, with futures prices rising while open interest declines.
LTM futures also advanced in the available derivatives data. Its October contract rose 1.74% to Rs 4,660, while open interest declined 2.50%, indicating short covering.
atch all the live updates on stock markets here.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
