Bharat Heavy Electricals Sees Surge in Put Option Activity Amid Bearish Sentiment

Heavy Put Option Volumes Signal Bearish Sentiment

On 12 January 2026, BHEL emerged as the most active stock in put options trading, with significant volumes concentrated at the ₹250 and ₹260 strike prices for the expiry on 27 January 2026. Specifically, 4,615 contracts were traded at the ₹250 strike, generating a turnover of approximately ₹709.9 lakhs, while the ₹260 strike saw even heavier activity with 5,807 contracts traded and a turnover exceeding ₹1,452.7 lakhs. Open interest figures remain robust at 1,792 and 1,852 contracts respectively, underscoring sustained investor interest in downside protection or speculative bearish bets.

The underlying stock price stood at ₹262.0, placing the ₹260 strike just slightly out-of-the-money and the ₹250 strike comfortably out-of-the-money. This concentration of put activity near the current market price suggests that traders are positioning for a potential decline or increased volatility in the near term.

Price Action and Technical Context

BHEL’s share price has underperformed its sector and the broader market on the day, declining by 4.57%, with an intraday low of ₹258.25, marking a 5.83% drop. This compares unfavourably to the Electric Equipment sector’s fall of 2.78% and the Sensex’s modest decline of 0.47%. The weighted average traded price skewed towards the lower end of the day’s range, indicating selling pressure.

From a technical standpoint, the stock trades above its 100-day and 200-day moving averages, which typically signal longer-term support. However, it remains below its 5-day, 20-day, and 50-day moving averages, reflecting short- to medium-term weakness. This mixed technical picture may be contributing to the cautious stance among investors, who appear to be hedging or speculating on further downside.

Sectoral and Market Dynamics

The heavy electrical equipment sector, to which BHEL belongs, has been under pressure recently, with a 1-day return of -2.58%, lagging the broader market. Investor participation in BHEL has risen sharply, with delivery volumes on 9 January reaching 1.18 crore shares, a 75.56% increase over the 5-day average. This heightened activity suggests that market participants are actively repositioning their portfolios amid the prevailing uncertainty.

Liquidity remains adequate for sizeable trades, with the stock’s average traded value supporting transactions up to ₹16.86 crore based on 2% of the 5-day average traded value. This ensures that option market participants can execute large hedging or speculative trades without significant market impact.

Mojo Grade Downgrade Reflects Growing Caution

BHEL’s mojo score currently stands at 60.0, placing it in the ‘Hold’ category. This represents an upgrade from a previous ‘Sell’ rating assigned on 15 September 2025, signalling a modest improvement in outlook. However, the mid-cap company’s market cap grade remains low at 2, indicating limited market capitalisation strength relative to peers. The downgrade and subsequent cautious upgrade reflect mixed fundamentals and market sentiment, which may be influencing the increased put option activity as investors seek downside protection.

Put Option Activity as a Hedging and Speculative Tool

The surge in put option volumes at strikes close to the current market price suggests that investors are actively hedging existing long positions or speculating on a near-term decline. Put options provide a mechanism to limit downside risk or profit from falling prices, and the concentration of activity at ₹250 and ₹260 strikes indicates these levels are viewed as critical support or resistance zones.

Open interest data corroborates this view, with sizeable outstanding contracts indicating that these positions are not merely intraday trades but part of a broader strategic positioning. The expiry date of 27 January 2026 is also noteworthy, as it falls within a typical monthly options cycle, often associated with increased volatility and portfolio adjustments.

Comparative Performance and Investor Implications

Compared to the broader market, BHEL’s 1-day return of -3.88% is significantly weaker than the Sensex’s -0.47%, highlighting the stock’s vulnerability amid current market conditions. The Electric Equipment sector’s 1-day return of -2.58% also underlines sector-wide challenges, including subdued demand and margin pressures.

For investors, the heightened put option activity serves as a cautionary signal. While the mojo grade suggests a hold stance, the technical and options market data point to increased downside risk or at least elevated volatility. Investors should carefully monitor upcoming earnings, sector developments, and macroeconomic factors that could influence BHEL’s trajectory.

Outlook and Strategic Considerations

Looking ahead, BHEL faces a challenging environment marked by sectoral headwinds and cautious investor sentiment. The stock’s technical indicators suggest a potential consolidation phase, while the heavy put option activity points to a guarded outlook among market participants. Investors should weigh the company’s fundamental prospects, including order book status, government policies, and global demand for heavy electrical equipment, against the current market signals.

Given the mixed mojo grade and recent price underperformance, a prudent approach would involve close monitoring of price action around the ₹250-₹260 levels, which appear to be key support zones as indicated by option strike concentrations. Hedging strategies using put options may continue to be favoured by risk-averse investors in the near term.

In summary, the surge in put option trading in BHEL highlights a growing bearish sentiment and a desire for downside protection amid a volatile market backdrop. While the company’s fundamentals and mojo rating suggest a hold, the technical and options market data counsel caution and vigilance for investors navigating this mid-cap heavy electrical equipment stock.

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