ITC Ltd Sees Heavy Call Option Activity Amidst Bearish Price Momentum

Stock Performance and Technical Overview

ITC Ltd. (NSE: ITC) has been under sustained selling pressure, with the stock price hitting a fresh 52-week low of ₹336.75 on 9 Jan 2026. Over the past seven trading sessions, the share has declined by approximately 16.4%, reflecting a pronounced bearish trend. This decline is in line with the broader FMCG sector, which recorded a 1.18% fall on the same day, slightly underperforming the Sensex’s 0.77% drop.

Technically, ITC is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a persistent downtrend. The stock’s delivery volume on 8 Jan was 2.42 crore shares, marking a sharp 60.99% decrease compared to its five-day average, indicating waning investor participation and liquidity concerns despite a reasonably liquid market capable of handling trades worth ₹45.16 crore based on 2% of the five-day average traded value.

Options Market Activity: Call Options Surge

Contrary to the bearish price action, the options market reveals heightened interest in call options for ITC Ltd. The most actively traded call option is the January 27, 2026 expiry with a strike price of ₹370. On this expiry, 11,596 contracts were traded, generating a turnover of ₹1.37 crore (137.3 lakhs). Open interest for this strike stands at 20,533 contracts, underscoring a substantial build-up of bullish bets or hedging activity at this level.

The underlying stock price at ₹337.05 is significantly below the ₹370 strike, suggesting that traders are positioning for a potential rebound or volatility-driven price movement in the near term. This divergence between the spot price and call option activity may indicate speculative interest or hedging strategies by institutional investors anticipating a recovery or a short squeeze scenario.

Fundamental and Market Sentiment Analysis

Despite the recent downgrade in its Mojo Grade from Hold to Sell on 29 Dec 2025, ITC Ltd. remains a heavyweight in the FMCG sector with a market capitalisation of ₹4,25,421 crore, categorised as a large-cap stock. The current Mojo Score of 48.0 reflects a cautious stance, driven by deteriorating price momentum and weakening fundamentals relative to sector peers.

The downgrade signals concerns over ITC’s near-term growth prospects and valuation metrics, which have not kept pace with sectoral advances. The stock’s market cap grade of 1 further emphasises its large size but also highlights limited upside potential under current conditions.

Expiry Patterns and Strike Price Implications

The concentration of call option activity at the ₹370 strike price, expiring on 27 Jan 2026, is particularly noteworthy. This strike is approximately 9.7% above the current market price, indicating that traders are either speculating on a sharp rebound or using these calls as part of complex option strategies such as spreads or hedges against short positions.

Open interest accumulation at this strike suggests that market participants are positioning for a potential volatility event or a technical bounce within the next three weeks. However, given the stock’s consistent underperformance and negative technical signals, such a recovery would require a catalyst, possibly linked to quarterly earnings, policy announcements, or sectoral tailwinds.

Comparative Sector and Market Context

ITC’s performance must be viewed in the context of the broader FMCG sector and the overall market. The sector’s 1.18% decline on 9 Jan 2026, slightly worse than the Sensex’s 0.77% drop, reflects a cautious investor mood amid inflationary pressures and changing consumer demand patterns. ITC’s inline performance with the sector suggests it is not an outlier but rather a reflection of sector-wide challenges.

Investors should also note the falling delivery volumes and the stock’s inability to sustain above key moving averages, which typically signal weakening conviction among buyers. This environment makes the heavy call option activity more intriguing, as it may represent a contrarian bet or hedging by sophisticated market participants.

Investor Takeaways and Outlook

For investors, the current scenario presents a mixed picture. The persistent downtrend and negative technical indicators caution against aggressive long positions in ITC Ltd. at present. The downgrade to a Sell grade by MarketsMOJO reinforces this cautious stance, suggesting limited near-term upside without a fundamental turnaround.

However, the robust call option activity at the ₹370 strike price indicates that some market participants are either anticipating a recovery or employing sophisticated option strategies to capitalise on potential volatility. This divergence between the options market and spot price action warrants close monitoring, especially as the 27 Jan expiry approaches.

Investors should weigh the risks of continued downside against the possibility of a technical rebound, considering broader sectoral trends and macroeconomic factors. Those seeking exposure to FMCG may also explore alternative large-cap stocks with stronger momentum and fundamentals, as identified by analytical tools like SwitchER.

Summary

In summary, ITC Ltd. is navigating a challenging phase marked by a seven-day losing streak, a fresh 52-week low, and a downgrade in its investment grade. Despite this, the surge in call option contracts at a strike price well above the current market level signals nuanced market positioning, possibly reflecting speculative or hedging activity. Investors should remain vigilant, balancing the bearish technical backdrop with the options market signals and broader sector dynamics.

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