Sun Pharmaceutical Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 1 February 2026, Sun Pharma’s put options with a strike price of ₹1600 witnessed a remarkable 3,175 contracts traded, generating a turnover of approximately ₹28.77 crores. The open interest for these contracts stands at 1,005, indicating sustained interest and potential accumulation of bearish positions ahead of the February expiry. The underlying stock closed at ₹1,623, hovering just above the strike price, which suggests that traders are actively hedging against a possible decline below this level.

Stock Price and Market Context

Despite the heavy put option activity, Sun Pharma’s shares have shown resilience in recent sessions. The stock has gained 2.16% over the last two days, outperforming its sector by 1.68% and the broader Sensex by 1.60%. On 1 February, the stock opened with a gap up of 2.8% and touched an intraday high of ₹1,655.7, a 3.79% increase from the previous close. However, it remains 4.66% above its 52-week low of ₹1,548, indicating that while the stock has recovered from recent lows, investors remain cautious.

Technical indicators present a mixed picture. The stock price is currently above its 5-day moving average but remains below the 20-day, 50-day, 100-day, and 200-day moving averages. This suggests short-term strength amid longer-term resistance levels. Additionally, delivery volumes have surged to 28.75 lakh shares on 30 January, a 23.44% increase compared to the five-day average, signalling rising investor participation and liquidity. The stock’s liquidity supports trade sizes up to ₹12.09 crores based on 2% of the five-day average traded value, making it attractive for institutional and retail traders alike.

Investor Sentiment and Hedging Strategies

The surge in put option volumes at the ₹1600 strike price suggests that investors are either hedging existing long positions or speculating on a near-term correction. Given the stock’s current price of ₹1,623, the ₹1600 strike is slightly out-of-the-money, making these puts a cost-effective way to protect against downside risk. The open interest of 1,005 contracts further confirms that these positions are not merely speculative but part of a broader risk management strategy.

Sun Pharma’s mojo score currently stands at 57.0, with a mojo grade of Hold, downgraded from Buy on 19 January 2026. This downgrade reflects a more cautious outlook amid sectoral headwinds and valuation concerns. The company’s market capitalisation remains robust at ₹3,89,604.01 crores, categorising it firmly as a large-cap stock. However, the market cap grade of 1 indicates limited upside potential relative to peers, which may be contributing to the increased put option interest.

Expiry Patterns and Market Implications

The 24 February 2026 expiry date is significant as it marks the end of the current monthly options cycle. Historically, expiry weeks tend to bring heightened volatility as traders adjust or close positions. The concentration of put options at ₹1600 suggests that the market is bracing for potential downside or at least a period of consolidation around this level. If the stock price dips below ₹1600 before expiry, these put holders could realise gains, potentially exerting additional downward pressure on the shares.

Conversely, if Sun Pharma maintains or surpasses current levels, the puts may expire worthless, benefiting option sellers who have collected premiums. This dynamic creates a tug-of-war between bullish and bearish forces, with the options market providing a valuable barometer of investor expectations.

Comparative Sector Performance and Outlook

Within the Pharmaceuticals & Biotechnology sector, Sun Pharma’s recent outperformance is notable but tempered by broader market caution. The sector’s one-day return stands at 0.15%, while Sun Pharma outpaced this with a 1.79% gain. However, the downgrade in mojo grade from Buy to Hold signals that analysts are reassessing growth prospects amid regulatory challenges and competitive pressures.

Investors should weigh the current put option activity as a signal of increased risk aversion. While the stock’s fundamentals remain solid, the options market suggests a guarded stance, possibly reflecting concerns over near-term earnings volatility or sector-specific headwinds such as pricing pressures and patent expiries.

Strategic Considerations for Investors

For long-term investors, the recent put option surge may present an opportunity to reassess portfolio exposure and consider protective strategies. Those holding Sun Pharma shares might explore buying puts as insurance against downside risk, especially given the proximity to the ₹1600 strike price. Conversely, traders with a bullish outlook could monitor the stock’s ability to sustain gains above key moving averages and the 52-week low buffer.

Given the stock’s liquidity and active options market, Sun Pharma remains a focal point for both hedgers and speculators. The interplay between technical resistance levels and option expiry dynamics will be critical in shaping price action over the coming weeks.

Conclusion

Sun Pharmaceutical Industries Ltd’s prominence in put option trading underscores a cautious market stance despite recent price gains. The concentration of activity at the ₹1600 strike price for the 24 February expiry highlights investor concerns about potential downside or volatility. While the stock continues to outperform its sector and broader indices, the downgrade to a Hold rating and mixed technical signals warrant careful monitoring. Investors should consider the implications of this options activity in the context of their risk tolerance and portfolio objectives as the expiry date approaches.

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