Central Depository Services Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 26 February 2026, CDSL recorded a striking 1,470 contracts traded in put options at the ₹1300 strike price, generating a turnover of approximately ₹28.67 crores. The open interest stood at 1,210 contracts, underscoring sustained interest in downside protection or speculative bearish bets. This level of activity is notable given the underlying stock price was ₹1310.40, just marginally above the strike, indicating that traders are bracing for a potential decline below this threshold in the coming weeks.

Expiry and Strike Price Patterns

The expiry date for these options is 30 March 2026, which is just over a month away. This timeframe suggests that investors are either hedging short-term risks or speculating on a near-term correction. The concentration of put contracts at ₹1300, close to the current market price, reflects a critical support level that traders are watching closely. Should the stock breach this level, it could trigger further downside momentum, validating the bearish positioning.

Price Performance and Technical Indicators

CDSL’s price performance on the day was disappointing, with a decline of 1.35%, underperforming its sector by 1.61%. The stock is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a persistent downtrend. This technical weakness is compounded by falling investor participation, as delivery volumes on 25 February dropped by 18.38% compared to the five-day average, indicating waning conviction among buyers.

Market Capitalisation and Sector Context

With a market capitalisation of ₹27,356.01 crores, CDSL is classified as a small-cap stock within the capital markets sector. Despite its size, the stock’s liquidity remains adequate, supporting trade sizes up to ₹2.85 crores based on 2% of the five-day average traded value. This liquidity ensures that the active options market is underpinned by a sufficiently robust underlying stock market, allowing for meaningful price discovery and hedging activity.

Mojo Score and Analyst Ratings

CDSL’s current Mojo Score stands at 37.0, categorised as a Sell rating, reflecting a downgrade from a previous Hold grade on 12 January 2026. This downgrade aligns with the deteriorating technicals and bearish options activity, signalling caution for investors. The market cap grade is a modest 3, indicating average liquidity and market presence relative to peers. These metrics collectively suggest that the stock is under pressure and may continue to face headwinds in the near term.

Investor Sentiment and Hedging Behaviour

The surge in put option volumes at the ₹1300 strike price is indicative of investors seeking downside protection or speculating on a price correction. Such activity often precedes or accompanies increased volatility, as market participants adjust their portfolios to mitigate risk. The fact that the open interest remains elevated suggests that these positions are not merely short-term trades but part of a broader strategic stance.

Sector and Market Comparison

While CDSL underperformed its capital markets sector by 1.61% on the day, the broader Sensex managed a modest gain of 0.24%. This divergence highlights sector-specific challenges or company-specific concerns weighing on CDSL. Investors should monitor whether this underperformance persists or if a rebound in sector sentiment can provide support to the stock.

Implications for Investors

For investors holding CDSL shares, the pronounced put option activity and technical weakness suggest a cautious approach. The stock’s failure to hold above key moving averages and the concentration of puts near the current price point imply that downside risk remains elevated. Those seeking to hedge existing positions may find the current options market conducive to protection strategies, while speculative traders might view the put volumes as a signal to reassess bullish convictions.

Outlook and Strategic Considerations

Looking ahead, the expiry on 30 March 2026 will be a critical juncture for CDSL. Should the stock price breach the ₹1300 level decisively, it could trigger further selling pressure and validate the bearish positioning evident in the options market. Conversely, a rebound above this strike price could alleviate some downside concerns, potentially reducing put option interest. Investors should closely monitor volume trends, open interest changes, and price action around this strike to gauge evolving market sentiment.

Conclusion

Central Depository Services (India) Ltd is currently under significant bearish pressure as evidenced by heavy put option trading at the ₹1300 strike price with expiry looming in just over a month. The stock’s technical underperformance, coupled with a downgrade in analyst ratings and falling investor participation, paints a cautious picture. While liquidity remains sufficient for active trading, investors should weigh the risks carefully and consider hedging strategies or alternative investments within the capital markets sector.

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