HDFC Bank Sees Surge in Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

Data from the options market reveals that HDFC Bank’s put options with strike prices of ₹900 and ₹920 have emerged as the most actively traded contracts for the upcoming 24 February expiry. Specifically, the ₹920 strike put option recorded 2,166 contracts traded, generating a turnover of ₹172.62 lakhs, while the ₹900 strike saw 1,811 contracts traded with a turnover of ₹87.95 lakhs. Open interest for these strikes remains elevated at 4,153 and 4,327 contracts respectively, underscoring sustained investor interest in downside protection or speculative bearish bets.

The underlying stock price currently stands at ₹926.90, placing these put strikes slightly out-of-the-money and indicating that traders are positioning for a potential correction or increased volatility in the near term. The concentration of open interest near these strike prices suggests that market participants are hedging existing long positions or speculating on a decline towards the ₹900 level.

Technical and Market Context

HDFC Bank’s stock performance today was largely in line with its sector peers, posting a 0.44% gain compared to the Private Sector Bank sector’s 0.50% rise and the Sensex’s 0.22% increase. However, the stock remains below its key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a persistent downtrend. This technical backdrop may be contributing to the heightened put option activity as investors seek downside protection.

Investor participation appears to be waning, with delivery volumes on 30 January falling by 12.71% against the five-day average, registering 2.22 crore shares. Despite this, liquidity remains robust, with the stock’s traded value supporting sizeable trades up to ₹60.73 crore without significant market impact. This liquidity profile facilitates active options trading and hedging strategies.

Mojo Score and Analyst Ratings

HDFC Bank currently holds a Mojo Score of 48.0, placing it in the 'Sell' grade category as of 28 January 2026, a downgrade from its previous 'Hold' rating. This shift reflects a deterioration in the stock’s fundamental and technical outlook according to MarketsMOJO’s proprietary scoring system. The bank’s market capitalisation stands at a substantial ₹14,15,899 crore, categorising it as a large-cap stock, yet its Market Cap Grade is rated at 1, indicating limited upside potential relative to peers.

The downgrade and bearish options activity together suggest that investors and analysts are increasingly cautious about HDFC Bank’s near-term prospects, possibly due to sectoral headwinds or broader macroeconomic concerns impacting private sector banks.

Expiry Patterns and Investor Behaviour

The 24 February 2026 expiry is shaping up as a critical juncture for HDFC Bank’s options market. The concentration of put open interest near ₹900 and ₹920 strikes indicates that traders are bracing for potential downside or volatility around these levels. Such positioning often precedes significant price movements, as option writers and holders adjust their hedges in response to evolving market conditions.

Moreover, the elevated turnover in put options relative to calls suggests a skew towards bearish sentiment or protective hedging. This is consistent with the stock’s technical weakness and the recent downgrade, signalling that market participants are either speculating on a decline or seeking insurance against downside risk.

Comparative Sector Performance

While HDFC Bank’s stock has gained marginally after two consecutive days of decline, its performance remains largely in line with the broader Private Sector Bank sector. The sector’s 1-day return of 0.50% slightly outpaces HDFC Bank’s 0.44%, indicating that the bank is not leading the sector’s recovery. This relative underperformance may be contributing to the cautious stance reflected in options trading.

Investors should also note that the stock’s trading below all major moving averages is a technical red flag, often interpreted as a sign of sustained selling pressure. This technical weakness, combined with falling delivery volumes, suggests that investor conviction in the stock’s near-term rally is limited.

Investor Implications and Outlook

For investors holding HDFC Bank shares, the surge in put option activity and the downgrade to a 'Sell' grade should prompt a reassessment of risk exposure. The options market is signalling increased hedging demand and bearish positioning, which may foreshadow near-term volatility or price correction. Those with long positions might consider protective strategies such as buying puts or tightening stop-loss levels to mitigate downside risk.

Conversely, traders with a bearish outlook could view the elevated put volumes and open interest as confirmation of market sentiment, potentially exploring short positions or put buying strategies to capitalise on expected weakness.

It is also prudent to monitor the stock’s behaviour as the 24 February expiry approaches, as shifts in open interest and volume can provide early signals of directional moves. Given the stock’s liquidity and active options market, HDFC Bank remains a focal point for derivative traders seeking to navigate the evolving banking sector landscape.

Conclusion

HDFC Bank Ltd. is currently experiencing significant put option activity, reflecting a cautious and somewhat bearish stance among investors and traders. The combination of technical weakness, a recent downgrade to a 'Sell' rating, and concentrated open interest near key strike prices suggests that downside risks are being actively priced in. Market participants should remain vigilant and consider hedging or rebalancing strategies in light of these developments.

As the expiry date draws near, the options market will continue to provide valuable insights into investor sentiment and potential price trajectories for this large-cap banking heavyweight.

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