Cholamandalam Investment Sees Heavy Put Option Activity Amid Bearish Sentiment

Intense Put Option Trading Highlights Bearish Sentiment

Data from the options market reveals that CHOLAFIN’s put options have attracted significant volumes, with the 30 March 2026 expiry witnessing the highest activity. The strike prices of Rs 1700, Rs 1640, Rs 1600, and Rs 1500 have seen a combined total of over 17,000 contracts traded, indicating a strong interest in downside protection or speculative bearish bets.

The Rs 1700 strike put option led the pack with 5,710 contracts traded, generating a turnover of approximately Rs 22.36 crores and an open interest of 1,999 contracts. This strike is notably close to the current underlying value of Rs 1,702.4, suggesting that traders are positioning for a potential decline below this level.

Following closely, the Rs 1600 strike saw 5,054 contracts traded with a turnover of Rs 10.26 crores and open interest of 915 contracts. The Rs 1640 and Rs 1500 strikes also recorded substantial activity, with 2,936 and 3,500 contracts traded respectively, underscoring a broad range of bearish hedging across near-the-money and out-of-the-money strikes.

Price Action and Volatility Context

CHOLAFIN’s share price has experienced a notable decline, falling 2.90% on the day and touching an intraday low of Rs 1,628, a drop of 7.21% from recent highs. This decline follows three consecutive days of gains, signalling a potential trend reversal. The stock’s weighted average traded price skewed towards the lower end of the day’s range, reinforcing the bearish momentum.

Volatility has surged, with intraday swings reaching 5.49%, reflecting heightened uncertainty among investors. While the stock remains above its 200-day moving average, it trades below its 5-day, 20-day, 50-day, and 100-day averages, indicating short- to medium-term weakness despite long-term support.

Investor participation has also waned, with delivery volumes on 25 February falling by 22.58% compared to the five-day average. This decline in committed buying interest may be contributing to the increased demand for put options as a hedge or speculative tool.

Mojo Grade Upgrade and Market Capitalisation

On 13 January 2026, Cholamandalam Investment & Finance Company Ltd was upgraded from a Hold to a Buy rating, reflecting improved fundamentals and growth prospects. The company holds a Mojo Score of 71.0, signalling a favourable outlook supported by strong financial metrics and quality grades. Despite this upgrade, the stock’s recent underperformance relative to its sector (down 3.57%) and the Sensex (up 0.21%) suggests that market participants remain cautious.

With a market capitalisation of Rs 1,51,020 crores, CHOLAFIN is a large-cap entity within the Non Banking Financial Company (NBFC) sector. Its liquidity profile remains robust, with average traded value supporting trade sizes up to Rs 3.66 crores, ensuring ease of entry and exit for institutional and retail investors alike.

Expiry Patterns and Open Interest Analysis

The expiry date of 30 March 2026 is attracting concentrated put option activity, which often precedes significant price movements or reflects hedging strategies ahead of quarterly results or macroeconomic events. The open interest figures at the Rs 1700 strike (1,999 contracts) and Rs 1500 strike (650 contracts) indicate that traders are maintaining sizeable positions, potentially anticipating downside risk or seeking to protect existing long holdings.

Such elevated open interest combined with high turnover suggests that the options market is pricing in a cautious outlook, with investors possibly expecting volatility to persist in the near term. This dynamic is consistent with the stock’s recent price behaviour and sectoral headwinds facing NBFCs amid tightening credit conditions and regulatory scrutiny.

Investor Implications and Outlook

For investors, the surge in put option volumes at multiple strike prices near and below the current market price signals a cautious stance on CHOLAFIN’s near-term prospects. While the Mojo Grade upgrade to Buy reflects confidence in the company’s medium- to long-term fundamentals, the options market activity and price volatility suggest that downside risks remain elevated in the short term.

Traders and portfolio managers may view the active put buying as a hedge against potential market corrections or sector-specific challenges, including interest rate fluctuations and credit growth concerns impacting NBFCs. The concentration of open interest at the Rs 1700 and Rs 1600 strikes could act as key support levels to watch, with breaches potentially triggering further downside.

Conversely, the stock’s position above the 200-day moving average and its large-cap status provide some cushion against sharp declines, offering a base for recovery should broader market conditions improve or company-specific catalysts emerge.

In summary, Cholamandalam Investment & Finance Company Ltd’s options market activity underscores a complex interplay between cautious investor sentiment and underlying fundamental strength. Market participants should closely monitor price action around key strike prices and expiry dates, alongside sectoral developments, to navigate this evolving landscape effectively.

Sector and Market Comparison

Compared to the NBFC sector’s modest gain of 0.11% on the day, CHOLAFIN’s 2.90% decline highlights its relative weakness. The Sensex’s positive return of 0.21% further accentuates this underperformance. This divergence may reflect company-specific concerns or profit-taking after recent gains, amplified by the elevated put option interest signalling hedging or bearish speculation.

Investors should weigh these factors against the company’s strong market capitalisation and recent rating upgrade, balancing short-term volatility with longer-term growth potential inherent in the NBFC sector’s recovery trajectory.

Conclusion

Cholamandalam Investment & Finance Company Ltd is currently at a crossroads, with its options market activity revealing heightened bearish positioning despite a positive fundamental outlook. The heavy put option volumes at strikes close to and below the current market price, combined with increased volatility and declining investor participation, suggest that traders are bracing for potential near-term weakness.

However, the company’s large-cap status, recent Mojo Grade upgrade to Buy, and position above the 200-day moving average provide a foundation for recovery once market uncertainties subside. Investors should remain vigilant, monitoring key technical levels and expiry dynamics while considering the broader NBFC sector environment before making allocation decisions.

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