Canara Bank Sees Surge in Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 29 January 2026, Canara Bank recorded a remarkable 6,914 put option contracts traded at the ₹150 strike price, generating a turnover of approximately ₹2,300.8 lakhs. The open interest for these puts stands at 1,272 contracts, indicating sustained interest and potential accumulation of bearish bets. The underlying stock price closed near ₹149.66, just below the strike, suggesting that traders are positioning for a possible decline or seeking downside protection.

This level of put option activity is significant given the stock’s recent volatility. After reaching a new 52-week high of ₹160.79 earlier in the day, Canara Bank reversed sharply, hitting an intraday low of ₹149, a drop of 5.54%. The weighted average price of traded volumes skewed closer to the day’s low, reinforcing the bearish momentum. The stock’s 1-day return of -4.93% starkly contrasts with the broader sector’s modest decline of -0.35% and the Sensex’s positive return of 0.38%, highlighting Canara Bank’s relative weakness.

Technical and Trend Analysis

From a technical perspective, Canara Bank’s price action reveals a complex picture. The stock remains above its 100-day and 200-day moving averages, which typically signal longer-term support. However, it trades below its 5-day, 20-day, and 50-day moving averages, indicating short- to medium-term selling pressure. This divergence suggests that while the broader trend may still be intact, near-term sentiment has turned cautious or negative.

Investor participation has also waned, with delivery volumes falling by 6.79% compared to the 5-day average, despite a sizeable delivery volume of 1.12 crore shares on 28 January. This decline in participation could imply reduced conviction among buyers, further supporting the bearish narrative.

Market Capitalisation and Sector Context

Canara Bank, classified as a mid-cap public sector bank, holds a market capitalisation of ₹1,45,085 crores. Despite its sizeable footprint, the stock’s recent underperformance relative to the public sector banking sector raises questions about its near-term outlook. The sector itself has been relatively stable, with only a minor 0.35% decline on the day, suggesting that Canara Bank’s weakness is more stock-specific than sector-driven.

Investor Sentiment and Hedging Strategies

The pronounced put option activity at the ₹150 strike price, which is near the current market price, suggests that investors are either hedging existing long positions or speculating on a price correction. Put options serve as insurance against downside risk, and the volume spike indicates a growing concern about potential declines in Canara Bank’s share price over the next month.

Given the expiry date of 24 February 2026, traders are likely positioning for volatility around upcoming corporate announcements, macroeconomic data releases, or sector-specific developments. The sizeable open interest also points to a build-up of bearish sentiment that could translate into increased selling pressure if the stock fails to hold key support levels.

Mojo Score Upgrade and Implications

Interestingly, Canara Bank’s Mojo Score was upgraded to 75.0 with a Buy grade on 28 January 2026, a day before the observed put option surge. This upgrade from a previous Hold rating reflects improved fundamentals or positive outlooks identified by MarketsMOJO’s proprietary analysis. However, the market’s reaction, as evidenced by the heavy put option activity and price decline, suggests a disconnect between fundamental optimism and short-term market sentiment.

Investors should weigh this divergence carefully. While the upgrade signals potential medium- to long-term value, the current technical and options market data warn of near-term headwinds. This duality underscores the importance of a balanced approach, combining fundamental research with technical and derivatives market insights.

Liquidity and Trading Considerations

Liquidity remains adequate for Canara Bank, with the stock’s traded value supporting a trade size of approximately ₹7.95 crores based on 2% of the 5-day average traded value. This ensures that investors can execute sizeable trades without significant market impact, an important factor for institutional participants managing large portfolios or hedging exposures.

Outlook and Investor Takeaways

In summary, Canara Bank’s elevated put option activity at the ₹150 strike price ahead of the 24 February expiry highlights a cautious or bearish stance among market participants. The stock’s recent price weakness, underperformance relative to its sector, and technical indicators all point to near-term challenges. However, the recent Mojo Score upgrade to a Buy rating suggests underlying fundamental strength that may support a recovery in the medium term.

Investors should monitor the evolving options open interest and price action closely, particularly around key support levels near ₹150. Those holding long positions may consider protective puts to hedge downside risk, while more aggressive traders might view the current volatility as an opportunity to capitalise on potential price swings. As always, a comprehensive analysis combining fundamental research, technical trends, and derivatives market signals will provide the best framework for informed decision-making.

Sector and Peer Comparison

Compared to its public sector banking peers, Canara Bank’s recent volatility and options market activity stand out. While the sector has remained relatively stable, the stock’s sharp intraday decline and heavy put option volume suggest company-specific factors at play. Investors should consider peer valuations, asset quality metrics, and macroeconomic factors impacting the banking sector when assessing Canara Bank’s prospects.

Expiry Patterns and Future Expectations

The 24 February 2026 expiry is a critical date for Canara Bank options traders. The concentration of put contracts at the ₹150 strike price indicates a key psychological and technical level. Should the stock remain above this level, many of these puts may expire worthless, potentially leading to short covering and a rebound in price. Conversely, a breach below ₹150 could trigger further downside as protective puts are exercised or converted into short positions.

Market participants will also be watching for any corporate announcements, policy changes, or macroeconomic developments that could influence the stock’s trajectory in the coming weeks.

Conclusion

Canara Bank’s recent surge in put option activity reflects a market grappling with uncertainty and hedging against potential downside risks. While the stock’s fundamentals have been positively reassessed by analysts, the technical signals and derivatives market data counsel caution. Investors should adopt a nuanced approach, balancing the improved Mojo Score and Buy rating against the evident short-term bearish sentiment. Close monitoring of price levels, option open interest, and sector dynamics will be essential to navigate the evolving landscape effectively.

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