HDFC Bank Sees Surge in Put Option Activity Amid Bearish Sentiment

Surge in Put Option Trading Highlights Bearish Sentiment

On 8 January 2026, HDFC Bank’s put options with a strike price of ₹940 and expiry on 27 January 2026 emerged as the most actively traded contracts in the market. A total of 5,580 contracts changed hands, generating a turnover of ₹4.68 crores. Open interest in these put options stands at 7,038 contracts, indicating sustained interest and potential accumulation of bearish bets or protective hedges.

The underlying stock closed at ₹942.10 on the same day, hovering just above the ₹940 strike price, which is a critical technical level. The concentration of put option activity at this strike suggests that market participants are positioning for a possible downside move or seeking insurance against further declines.

Technical Weakness Fuels Cautious Positioning

HDFC Bank’s share price has been under pressure, declining for five consecutive sessions and losing 5.94% over this period. The stock is currently trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a bearish technical setup. This persistent weakness has likely prompted investors to increase put option exposure as a hedge or speculative play on further downside.

Despite the broader private sector banking sector also experiencing a decline of 0.80% on the day, HDFC Bank’s 0.59% fall was slightly less severe, though still indicative of sectoral headwinds. The Sensex, by comparison, was relatively stable with a marginal decline of 0.12%, underscoring that the bank’s stock-specific factors are driving the bearish sentiment.

Rising Investor Participation and Liquidity Support Active Trading

Investor participation in HDFC Bank shares has been rising, with delivery volumes reaching 2.31 crore shares on 8 January, a 6.66% increase over the five-day average. This heightened activity supports the liquidity necessary for sizeable option trades and reflects growing market interest in the stock’s near-term prospects.

Liquidity metrics indicate that the stock can comfortably handle trade sizes up to ₹64.31 crores based on 2% of the five-day average traded value, ensuring that option market makers and institutional investors can execute large hedging or speculative positions without significant market impact.

Mojo Score and Market Capitalisation Context

HDFC Bank holds a robust Mojo Score of 72.0, reflecting a favourable buy rating, although this represents a slight downgrade from a previous Strong Buy rating as of 7 January 2026. The bank’s market capitalisation stands at an imposing ₹14,50,304 crores, categorising it firmly as a large-cap stock within the private sector banking industry.

The downgrade in Mojo Grade suggests a cautious stance by analysts, likely influenced by the recent price weakness and increased put option activity. Investors should weigh this alongside the bank’s strong fundamentals and sectoral positioning.

Expiry Patterns and Implications for January 2026

The expiry date of 27 January 2026 is attracting significant attention, with the ₹940 strike price acting as a focal point for put option traders. The clustering of open interest at this level indicates a market consensus that the stock may test or breach this price point before expiry, or that investors are keen to protect gains in case of a downturn.

Such expiry dynamics often lead to increased volatility as traders adjust positions, roll over contracts, or close out hedges. Market participants should monitor price action closely in the coming weeks to gauge whether the bearish sentiment materialises or if a reversal occurs.

Balancing Bearish Positioning with Long-Term Prospects

While the surge in put option activity and technical indicators point to near-term caution, HDFC Bank’s underlying business remains strong. The bank continues to benefit from a large and diversified customer base, steady loan growth, and improving asset quality. These factors support a constructive long-term outlook despite short-term volatility.

Investors employing options strategies may be using puts either as speculative bets on further declines or as protective hedges against existing long positions. This duality underscores the importance of a nuanced approach to trading and investment decisions in the current environment.

Investor Takeaways and Strategic Considerations

Given the current market signals, investors should carefully assess their exposure to HDFC Bank shares. The elevated put option volumes and technical breakdown suggest a cautious stance in the near term, with potential for further downside or volatility around the January expiry.

Those holding long positions may consider protective puts or stop-loss strategies to mitigate risk, while traders looking to capitalise on volatility might explore put buying or spreads to benefit from bearish momentum. Conversely, value investors with a longer horizon might view the current weakness as an opportunity to accumulate shares at more attractive valuations, given the bank’s strong fundamentals and sector leadership.

Monitoring open interest changes and price action in the coming days will be crucial to understanding whether the bearish sentiment intensifies or if a technical rebound emerges.

Conclusion

HDFC Bank Ltd. is currently at a technical crossroads, with significant put option activity signalling increased bearish positioning ahead of the 27 January 2026 expiry. The stock’s recent consecutive declines and trading below key moving averages reinforce a cautious near-term outlook. However, the bank’s solid fundamentals and large-cap stature provide a counterbalance to short-term volatility.

Investors and traders alike should remain vigilant, employing appropriate risk management strategies while analysing evolving market dynamics and option market signals to make informed decisions.

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