HDFC Bank Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 23 February 2026, HDFC Bank’s put options with strike prices of ₹920 and ₹910 emerged as the most actively traded contracts. The ₹920 strike put saw 4,310 contracts traded, generating a turnover of ₹1.02 crores, while the ₹910 strike put recorded 5,172 contracts with a turnover of ₹54.6 lakhs. Open interest for these strikes stood at 2,815 and 2,007 contracts respectively, indicating sustained interest and potential accumulation of bearish bets or protective hedges.

The underlying stock price at the time was ₹923.45, placing these put strikes slightly out-of-the-money, which is typical for investors seeking downside protection or anticipating a near-term correction. The expiry date of 24 February 2026 adds urgency to these positions, as traders position themselves ahead of the weekly options expiry.

Stock Performance and Technical Context

HDFC Bank outperformed its private sector banking peers by 0.52% on the day, delivering a 1.15% gain compared to the sector’s 0.76% and the Sensex’s 0.64% returns. This rebound followed four consecutive days of declines, suggesting a potential short-term trend reversal. However, the stock remains below its 20-day, 50-day, 100-day, and 200-day moving averages, despite trading above the 5-day average, indicating mixed momentum and a cautious technical outlook.

Investor participation has waned recently, with delivery volumes on 20 February falling by 20.28% against the five-day average, signalling reduced conviction among buyers. Liquidity remains robust, with the stock capable of handling trade sizes up to ₹39.15 crores based on 2% of the five-day average traded value, ensuring that option market activity is supported by sufficient underlying market depth.

Mojo Grade Downgrade and Market Sentiment

Adding to the cautious tone, HDFC Bank’s Mojo Grade was downgraded from Hold to Sell on 9 February 2026, reflecting a deterioration in its fundamental or technical outlook. The current Mojo Score stands at 48.0, reinforcing a below-average sentiment among analysts and investors. The bank’s market capitalisation remains substantial at ₹14,19,243.08 crores, categorising it as a large-cap stock, but the low Market Cap Grade of 1 suggests limited upside potential relative to its size.

Implications of Heavy Put Option Trading

The surge in put option volumes at the ₹910 and ₹920 strikes suggests that market participants are either hedging existing long positions or speculating on a near-term decline in HDFC Bank’s share price. Put options provide a form of insurance against downside risk, and elevated open interest at these strikes often precedes increased volatility or price corrections.

Given the stock’s recent technical weakness and the downgrade in its Mojo Grade, the increased put activity aligns with a more cautious or bearish market stance. Traders may be positioning for a pullback towards the ₹900 level or lower, which would represent a meaningful correction from current levels.

However, it is important to note that the stock’s outperformance relative to its sector and the broader market on the day indicates that some investors remain optimistic or are taking advantage of dips to accumulate shares. This divergence between option market sentiment and spot price action highlights the complexity of investor positioning in a large-cap banking stock amid evolving macroeconomic and sectoral conditions.

Expiry Patterns and Strategic Considerations

The 24 February 2026 expiry is a weekly options expiry, which often sees heightened activity as traders adjust or close positions. The concentration of put contracts near the current price level suggests that market participants are actively managing risk ahead of this date. Open interest levels indicate that these positions are not merely speculative but may represent significant hedging flows from institutional investors or proprietary trading desks.

Investors should monitor the stock’s price action closely in the coming sessions, especially around the ₹910-₹920 range, as a breach below these levels could trigger further downside momentum. Conversely, a sustained move above the 20-day moving average could alleviate bearish pressures and reduce put option demand.

Broader Market and Sector Context

HDFC Bank operates within the private sector banking industry, a segment that has shown resilience but also faces headwinds from rising interest rates and regulatory changes. The bank’s ability to maintain liquidity and manage credit quality will be critical in the near term. The current put option activity may reflect concerns about these macro factors, as well as company-specific risks highlighted by the recent Mojo Grade downgrade.

Investors should weigh these risks against the bank’s large market capitalisation and entrenched market position. While the stock remains a core holding for many portfolios, the option market signals suggest a period of increased caution and potential volatility ahead.

Conclusion

In summary, the heavy put option trading in HDFC Bank Ltd. ahead of the 24 February 2026 expiry underscores a growing bearish or hedging sentiment among investors. Despite a short-term rebound in the stock price, technical indicators and a recent downgrade in the Mojo Grade point to a cautious outlook. Market participants should monitor option open interest and strike price concentrations closely, as these provide valuable insights into potential price movements and risk management strategies.

For investors, balancing exposure to HDFC Bank with appropriate risk controls and considering alternative opportunities within the banking sector or broader market may be prudent in the current environment.

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