ETMarkets.com
Surge in Bearish Bets on Local IT Counters Amid AI Fears
The upcoming rollovers in IT stock futures as NSE’s February contracts expire on Tuesday will provide analysts with a clearer understanding of trader sentiment in the near term. Recent developments in the AI sector have led to a substantial increase in bearish derivative bets on India’s IT sector, marking a notable shift in investor confidence.
– High Levels of Bearish Positions: Bearish bets on key players like Infosys, Coforge, and Persistent Systems have reached record highs, according to SBI Securities. The Nifty IT index has plummeted over 17% since February 3, following the announcement of Anthropic’s automation tool, Claude Cowork, which has stoked concerns about the future growth of software exporters.
– Open Interest Growth: As of February 20, open interest (OI) in large-cap IT stock futures surged by 39%, compared to the average cumulative OI between January 1, 2024, and January 31, 2026. For mid-cap IT contracts, the increase is even more pronounced at 70%. Sudeep Shah, head of Technical and Derivative Research at SBI Securities, notes that the drastic rise in OI combined with falling stock prices indicates a significant buildup of short positions in IT stocks.
Current Rollovers and Market Sentiment
The current rollover of positions to the March series stands at 67%, significantly lower than the 96% observed in the previous expiry. Highlights include:
– Infosys: Rollover at 74.6%, down from 89.4% in the previous series.
– TCS: Rollover at 65.6%, versus 96.4% in the February series.
February has been challenging for IT stocks, with the Nifty IT index declining in 10 out of 16 trading sessions. Individual stocks have shown:
– Coforge: Down nearly 19%
– LTIMindtree and Infosys: Each down about 18%
This collective decline reflects a lack of investor interest, as noted by analysts. Dhupesh Dhameja, a derivatives analyst at Samco Securities, emphasizes that when IT stocks attempted a rebound, there was little accompanying increase in open interest, indicating that most price recovery was due to short covering rather than new buying interest.
Cautious Outlook Ahead
Market sentiment remains reserved ahead of the monthly expiry. Key insights include:
– Options Data: Noticeable call writing at resistance levels suggests traders expect limited upside in the immediate term. While lower-level put writing has occurred, it seems more defensive rather than an aggressive bullish stance.
– Investment Caution: Shah advises against trying to time purchases in IT stocks, as their technical structures currently appear weak. He suggests waiting for stabilization in the IT index and clearer indicators of robust buying interest before considering new investments.
In conclusion, the surge in bearish bets on local IT counters reflects heightened anxiety among investors, primarily driven by uncertainties surrounding advancements in AI technology. Stakeholders are advised to remain vigilant and patient as the market navigates through these challenging times.