Bharat Dynamics Ltd Sees Heavy Call Option Activity Amid Bearish Price Action

Recent Price Performance and Market Context

Bharat Dynamics Ltd, currently trading at ₹1,320.40, has been under pressure over the past two sessions, registering a cumulative decline of 13.2%. This contrasts sharply with the Aerospace & Defence sector’s modest gains and the broader Sensex’s positive returns, which rose 0.80% and 0.22% respectively on the latest trading day. The stock’s intraday range has been volatile, touching a high of ₹1,412.10 (+2.02%) and a low of ₹1,330 (-3.91%), with the weighted average price skewed towards the lower end, indicating selling pressure.

Technical indicators reinforce the bearish trend, with BDL trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — suggesting sustained downward momentum. Investor participation has notably increased, with delivery volumes surging by 173.08% to 18.56 lakh shares on 1 February, signalling heightened interest amid the price decline. Liquidity remains adequate, supporting sizeable trades up to ₹9.83 crore without significant market impact.

Call Option Activity: Strike Price and Expiry Insights

The most active call option for Bharat Dynamics Ltd is the February 24, 2026 expiry at the ₹1,400 strike price. A total of 3,390 contracts changed hands, generating a turnover of ₹5.01 crore. Open interest stands at 1,306 contracts, reflecting substantial outstanding positions that could influence price dynamics as expiry approaches.

This strike price is approximately 6% above the current underlying value, indicating that traders are positioning for a potential rebound or at least hedging against volatility. The heavy call buying at this level suggests a degree of bullish speculation or protective strategies, despite the stock’s recent weakness and a downgrade in its Mojo Grade from Hold to Sell on 27 January 2026. The downgrade, accompanied by a low Mojo Score of 34.0 and a Market Cap Grade of 2, underscores cautious sentiment among analysts.

Investor Sentiment and Strategic Implications

The divergence between the stock’s bearish price action and the robust call option activity at a higher strike price suggests a nuanced market outlook. Some investors may be speculating on a near-term recovery, possibly anticipating positive developments in defence contracts or government orders that could boost Bharat Dynamics’ earnings. Others might be employing call options as a hedge against existing short positions or as part of complex option strategies such as spreads or collars to manage risk.

Given the stock’s recent underperformance relative to its sector and the broader market, the call option interest could also reflect a contrarian stance by sophisticated traders seeking value at depressed levels. However, the downgrade to a Sell rating and the low Mojo Score indicate that fundamental challenges persist, including valuation concerns and potential headwinds in the Aerospace & Defence industry.

Comparative Analysis and Market Position

Bharat Dynamics Ltd’s market capitalisation stands at ₹48,606.19 crore, categorising it as a mid-cap stock within the Aerospace & Defence sector. Despite its size and strategic importance, the company’s current Mojo Grade of Sell contrasts with its previous Hold rating, signalling deteriorating fundamentals or increased risk factors. The Market Cap Grade of 2 further reflects moderate liquidity and market interest relative to peers.

In comparison, other stocks in the sector have maintained or improved their ratings, benefiting from stable order books and government defence spending. Bharat Dynamics’ recent price weakness and option market activity may therefore be a reflection of company-specific concerns rather than sector-wide trends.

Expiry Outlook and Potential Price Catalysts

With the 24 February 2026 expiry approaching, the open interest in call options at the ₹1,400 strike price will be closely monitored by market participants. Should the stock price approach or surpass this level, option writers may face increased risk, potentially triggering hedging activity that could amplify price movements.

Conversely, if the stock remains below this strike price, many call options may expire worthless, which could reinforce bearish sentiment. Investors should also consider broader macroeconomic factors, defence budget allocations, and geopolitical developments that could influence Bharat Dynamics’ order pipeline and earnings trajectory.

Conclusion: Navigating Mixed Signals

Bharat Dynamics Ltd’s current market behaviour presents a complex picture. The heavy call option activity at a strike price above the prevailing market level suggests some degree of bullish positioning or hedging, yet the underlying stock continues to face downward pressure and a recent downgrade in analyst sentiment. Investors should weigh these conflicting signals carefully, considering both technical indicators and fundamental factors before making trading decisions.

Given the stock’s mid-cap status and sector dynamics, monitoring option market trends alongside price action can provide valuable insights into investor expectations and potential turning points. Caution is advised, especially in light of the recent negative momentum and the company’s current Mojo Grade of Sell.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →