HDFC Bank Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

Data from the derivatives market reveals that HDFC Bank’s put options have been the most actively traded among private sector banks, with significant volumes concentrated at strike prices close to the current underlying value of ₹947.6. The most traded put options expiring on 24 February 2026 include strikes at ₹950, ₹940, ₹930, and ₹900, collectively accounting for over 17,000 contracts traded in a single session.

Specifically, the ₹950 strike saw 5,459 contracts traded, generating a turnover of ₹397.52 lakhs and an open interest of 2,811 contracts. The ₹940 strike followed with 4,060 contracts traded and a turnover of ₹195.39 lakhs. The ₹930 and ₹900 strikes recorded 4,874 and 2,988 contracts traded respectively, with turnovers of ₹149.58 lakhs and ₹32.37 lakhs. Open interest at the ₹930 strike is particularly notable at 4,567 contracts, indicating sustained interest at this level.

Market Context and Price Action

HDFC Bank’s stock price has shown mixed signals in recent sessions. The stock has gained for two consecutive days, delivering a 2.97% return over this period, and opened with a gap up of 6% on the latest trading day, touching an intraday high of ₹994, a 7.1% increase. However, the weighted average price suggests that most volume traded closer to the day’s low, hinting at underlying selling pressure.

Technically, the stock is trading above its 5-day and 20-day moving averages but remains below its 50-day, 100-day, and 200-day averages, reflecting a cautious medium-term outlook. The private sector banking sector has outperformed with a 2.77% gain, while HDFC Bank underperformed slightly, rising 2.12% compared to the sector’s 2.66% and the Sensex’s 2.56% gains.

Investor participation appears to be waning, with delivery volumes falling by 23.3% against the five-day average, signalling reduced conviction among buyers. Liquidity remains adequate, with the stock capable of handling trade sizes up to ₹54.53 crores based on recent average traded values.

Bearish Positioning and Hedging Implications

The heavy put option activity at strike prices ranging from ₹900 to ₹950 suggests that market participants are either hedging existing long positions or speculating on a potential downside correction in HDFC Bank’s shares. The concentration of open interest at the ₹930 strike, which is nearly 1.8% below the current market price, indicates a key support level where traders expect the stock might find buying interest or where protective puts are being accumulated.

Given the bank’s recent upgrade from a Hold to a Sell rating by MarketsMOJO on 28 January 2026, with a Mojo Score of 48.0 and a Market Cap Grade of 1, the bearish sentiment is further reinforced. The downgrade reflects concerns over valuation pressures and sectoral headwinds, prompting investors to adopt a more cautious stance.

Moreover, the sizeable turnover in put options, particularly at the ₹950 strike which is slightly above the current price, points to active hedging strategies by institutional investors aiming to limit downside risk amid volatile market conditions.

Sector and Market Comparison

While HDFC Bank’s private sector banking peers have generally exhibited positive momentum, the bank’s relative underperformance and increased put option interest highlight a divergence in investor confidence. The sector’s 2.77% gain contrasts with HDFC Bank’s 2.12% rise, underscoring the cautious approach investors are taking towards this stock.

In the broader market context, the Sensex’s 2.56% gain on the same day indicates a generally bullish environment, yet the hedging activity in HDFC Bank’s options market suggests that investors are wary of potential volatility or sector-specific risks that could impact the bank’s near-term performance.

Outlook and Investor Takeaways

Investors should closely monitor the evolving options market dynamics for HDFC Bank as the 24 February expiry approaches. The elevated put option volumes and open interest at strikes near the current price level indicate that downside risks are being actively priced in, despite recent price gains.

Given the bank’s large market capitalisation of ₹14,58,405.76 crores and its pivotal role in the private sector banking industry, any significant price movement could have broader sectoral implications. The downgrade to a Sell rating by MarketsMOJO suggests that investors may want to reassess their exposure and consider hedging strategies or alternative investments within the sector.

Technical indicators, such as the stock’s position relative to its moving averages and declining delivery volumes, further support a cautious stance. While short-term rallies remain possible, the options market activity signals that downside protection remains a priority for many market participants.

Conclusion

HDFC Bank’s surge in put option trading ahead of the February expiry reflects a growing bearish sentiment and heightened hedging activity. Despite recent gains, investors appear to be preparing for potential volatility or a correction, as evidenced by the concentration of put contracts at strike prices near the current market level. The downgrade to a Sell rating and the stock’s technical positioning reinforce the need for vigilance and strategic risk management in portfolios holding this large-cap banking stock.

Market participants should continue to track open interest and volume trends in the options market as key indicators of investor sentiment and potential price direction in the coming weeks.

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