HDFC Bank Sees Surge in Put Option Activity Amid Bearish Sentiment

Elevated Put Option Volumes Highlight Investor Caution

On 16 February 2026, HDFC Bank’s put options with a strike price of ₹920 emerged as the most actively traded contracts, with 4,475 contracts changing hands. This surge in put option volume generated a turnover of approximately ₹21.88 crores, reflecting significant investor interest in downside protection or speculative bearish bets. The open interest for these puts stands at 4,988 contracts, underscoring sustained positioning ahead of the weekly expiry on 24 February.

The underlying stock price hovered near ₹920.75, almost at the put strike price, indicating that traders are closely monitoring this level as a critical support zone. The concentration of activity at this strike suggests that market participants are bracing for potential downside or increased volatility in the near term.

Price and Technical Indicators Point to Weakness

HDFC Bank’s share price has been trading in a narrow range of ₹6.3 on the day, reflecting subdued volatility but underlying weakness. The stock closed with a marginal decline of 0.61%, slightly underperforming the private sector banking sector’s 0.52% fall and the broader Sensex’s 0.22% dip on the same day. Notably, the bank’s price is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a bearish technical setup.

Investor participation has also waned, with delivery volumes on 16 February falling by 37.29% compared to the five-day average, indicating reduced conviction among buyers. Despite this, liquidity remains adequate, with the stock’s traded value supporting sizeable trades up to ₹64.28 crores, ensuring that option and stock market participants can execute sizeable positions without significant slippage.

Mojo Score and Ratings Reflect Deteriorating Outlook

MarketsMOJO’s latest assessment assigns HDFC Bank a Mojo Score of 48.0, categorising the stock as a ‘Sell’ with a recent downgrade from ‘Hold’ on 9 February 2026. The bank’s market cap grade remains at 1, reflecting its large-cap status with a market capitalisation of ₹14,15,934.65 crores. This downgrade aligns with the technical weakness and increased put option activity, signalling that both fundamental and technical factors are weighing on investor sentiment.

The downgrade was influenced by a combination of factors including slowing credit growth in the private banking sector, margin pressures, and heightened regulatory scrutiny. These challenges have tempered expectations for near-term earnings growth, prompting investors to seek downside protection through options.

Put Options as a Hedge and Bearish Indicator

The concentration of put option activity at the ₹920 strike price expiring on 24 February suggests that market participants are either hedging existing long positions or speculating on a price decline. Put options provide a cost-effective way to protect portfolios against downside risk, especially when the underlying is trading near the strike price.

Given the stock’s current trading below all major moving averages and the recent downgrade, the elevated open interest in puts may also reflect a broader bearish positioning by institutional investors. This is consistent with the sector’s modest underperformance and the cautious stance adopted by market participants amid macroeconomic uncertainties.

Sector and Market Context

HDFC Bank’s performance is broadly in line with the private sector banking sector, which declined by 0.52% on the day, slightly worse than the Sensex’s 0.22% fall. The sector faces headwinds from rising interest rates, slowing loan growth, and competitive pressures from new-age fintech players. These factors have contributed to a cautious outlook, reflected in the option market’s skew towards puts.

Investors should also note the narrowing trading range and falling delivery volumes, which may indicate indecision or a wait-and-watch approach ahead of key economic data releases and corporate earnings announcements scheduled later this month.

Investor Takeaway and Outlook

For investors, the surge in put option activity at the ₹920 strike price and the technical weakness in HDFC Bank’s stock price warrant caution. The current environment suggests that downside risks are being actively managed through options, and the stock may face further pressure if it breaks below this critical support level.

However, the bank’s large-cap status and dominant position in the private banking sector provide some cushion against extreme volatility. Long-term investors should monitor upcoming quarterly results and macroeconomic developments closely, as these will be key drivers of sentiment and price direction in the near term.

Traders and portfolio managers may consider using put options as a hedging tool to mitigate risk, especially given the stock’s recent downgrade and the prevailing bearish technical signals. The option market’s activity serves as a valuable barometer of market expectations and risk appetite.

Conclusion

HDFC Bank Ltd. is currently navigating a challenging phase marked by increased bearish positioning in the options market and technical weakness in its share price. The heavy put option volumes at the ₹920 strike price expiring on 24 February 2026 highlight investor caution and the desire for downside protection. While the bank’s fundamentals remain robust in the long term, near-term headwinds and a deteriorating Mojo Grade suggest that investors should exercise prudence and consider hedging strategies to safeguard their portfolios.

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