HDFC Bank Sees Heavy Put Option Activity Amid Bearish Sentiment Ahead of January Expiry

Put Option Activity Highlights

Data from the derivatives market reveals that HDFC Bank’s put options with strike prices of ₹1,000 and ₹990 expiring on 27 January 2026 have emerged as the most actively traded contracts. Specifically, the ₹1,000 strike put saw 3,637 contracts traded, generating a turnover of ₹371.26 lakhs, while the ₹990 strike put recorded 3,757 contracts with a turnover of ₹298.17 lakhs. Open interest for these strikes stands at 4,176 and 2,146 contracts respectively, indicating sustained interest and potential accumulation of bearish bets.

The underlying stock closed at ₹988.65 on 5 January 2026, hovering just below the ₹1,000 strike price, which is a psychologically significant level for traders. The concentration of put option activity at these strikes suggests that investors are positioning for a possible downside or are seeking protection against near-term volatility.

Market Context and Stock Performance

HDFC Bank’s share price has underperformed its sector by 1.06% on the day, closing down 1.19%, compared to the private sector banking sector’s decline of 0.22% and the broader Sensex’s marginal fall of 0.15%. The stock remains comfortably above its 100-day and 200-day moving averages, signalling a longer-term uptrend, but it is trading below its 5-day, 20-day, and 50-day averages, reflecting short-term weakness and investor caution.

Investor participation has also waned recently, with delivery volumes falling by 16.64% against the five-day average, suggesting reduced conviction among buyers. Despite this, liquidity remains robust, with the stock’s traded value supporting sizeable transactions up to ₹31.52 crores, ensuring ease of entry and exit for institutional and retail investors alike.

Investor Sentiment and Hedging Strategies

The surge in put option volumes at strike prices close to the current market price indicates a cautious stance among investors. Put options serve as a hedge against potential declines or as speculative instruments betting on a fall in the underlying stock. The elevated open interest at ₹1,000 and ₹990 strikes suggests that market participants are either protecting existing long positions or speculating on a correction in HDFC Bank’s share price.

Given the stock’s proximity to its 52-week high of ₹1,020.5, just 3.16% away, the increased put activity may reflect profit-booking pressures or concerns over near-term macroeconomic factors impacting the banking sector. The private sector banking industry, while fundamentally strong, faces challenges such as rising interest rates and asset quality pressures, which could be influencing investor sentiment.

Fundamental Strengths and Market Ratings

Despite the cautious derivatives positioning, HDFC Bank maintains a robust fundamental profile. The bank’s market capitalisation stands at a commanding ₹15,22,534.68 crores, categorising it as a large-cap stock with significant institutional interest. The MarketsMOJO Mojo Score for HDFC Bank is an impressive 80.0, reflecting strong financial health, consistent earnings growth, and favourable valuation metrics.

Notably, the bank’s Mojo Grade was upgraded from 'Buy' to 'Strong Buy' on 2 January 2026, underscoring improved outlooks from analysts and enhanced confidence in its growth trajectory. This upgrade factors in the bank’s resilient asset quality, expanding retail franchise, and steady net interest margin performance.

Expiry Patterns and Implications for January 2026

The January 27 expiry date for the active put options is critical, as it coincides with the end of the first month of the calendar year, a period often marked by portfolio rebalancing and strategic positioning by institutional investors. The concentration of open interest and turnover in put options expiring on this date suggests that traders are preparing for potential volatility or downside risk in the near term.

Investors should monitor the stock’s price action closely as expiry approaches, particularly around the ₹1,000 and ₹990 strike levels, which may act as key support or resistance zones. A breach below these levels could trigger further downside momentum, while a rebound may alleviate bearish pressures and restore confidence.

Balancing Bearish Sentiment with Long-Term Prospects

While the derivatives market signals caution, it is important to contextualise this within HDFC Bank’s broader investment case. The bank’s strong capital adequacy, diversified loan book, and digital initiatives continue to support its competitive positioning. Moreover, the recent Mojo Grade upgrade reflects an improved risk-reward profile, making it a compelling pick for long-term investors despite short-term volatility.

Investors should weigh the increased put option activity as a tactical indicator rather than a fundamental red flag. The hedging behaviour may be prudent risk management amid uncertain macroeconomic conditions rather than outright bearish conviction. Consequently, a measured approach combining technical analysis with fundamental insights is advisable when considering exposure to HDFC Bank in the current environment.

Conclusion

HDFC Bank Ltd.’s put options have emerged as the most actively traded contracts in the derivatives segment, reflecting heightened investor caution and hedging ahead of the January 2026 expiry. The concentration of activity at ₹1,000 and ₹990 strike prices underscores the significance of these levels as near-term support zones. Despite this, the bank’s strong fundamentals, large-cap stature, and recent upgrade to a 'Strong Buy' rating provide a solid foundation for investors looking beyond short-term fluctuations.

Market participants should continue to monitor open interest trends, price movements, and sector developments to gauge evolving sentiment. The interplay between derivatives positioning and underlying stock performance will be crucial in shaping HDFC Bank’s trajectory in the weeks ahead.

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