Tata Consultancy Services Sees Heavy Call Option Activity Amid Bearish Price Action

Recent Price Performance and Market Context

TCS has been under pressure over the past two sessions, declining by 6.61% cumulatively and touching an intraday low of ₹2,780.1 on 12 February 2026. This marks a new 52-week low for the stock, which currently trades at ₹2,789.5, well below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The stock’s day change was a notable -3.86%, underperforming the broader IT - Software sector, which itself fell by 3.73%, and the Sensex, which declined by 0.45% on the same day.

Investor participation has also waned, with delivery volumes dropping by 30.47% compared to the 5-day average, signalling reduced conviction among long-term holders. Despite this, TCS maintains a relatively high dividend yield of 3.75%, which may offer some defensive appeal amid the current volatility.

Call Option Activity: Strike Prices and Expiry Patterns

Amid this backdrop, the options market reveals a striking divergence. The most active call options for TCS are concentrated around the 24 February 2026 expiry, with two strike prices drawing substantial interest: ₹2,900 and ₹3,000.

The ₹2,900 strike call options saw 10,537 contracts traded, generating a turnover of approximately ₹646.5 lakhs and an open interest of 4,878 contracts. Meanwhile, the ₹3,000 strike calls recorded even higher activity, with 14,167 contracts traded, turnover of ₹369.65 lakhs, and a significantly larger open interest of 16,062 contracts. This open interest concentration at the ₹3,000 strike suggests a strong bullish positioning by market participants, anticipating a potential rebound or at least a stabilisation above this level within the next two weeks.

It is noteworthy that the underlying stock price at ₹2,789.5 is currently below both these strike prices, indicating that traders are either speculating on a sharp recovery or employing these calls as part of more complex hedging or spread strategies. The weighted average price of traded contracts skewing closer to the day's low further emphasises the cautious sentiment prevailing in the market.

Mojo Score and Analyst Ratings

TCS currently holds a Mojo Score of 51.0, placing it in the 'Hold' category, an upgrade from its previous 'Sell' rating as of 22 April 2025. This reflects a cautious stance by analysts, recognising the stock’s large market capitalisation of ₹10,52,646 crores but tempered by recent price weakness and sector headwinds. The Market Cap Grade is 1, indicating its status as a large-cap stock with significant liquidity and institutional interest.

Despite the downgrade in short-term price momentum, the stock’s fundamentals remain robust, supported by its dominant position in the software and consulting industry. However, the technical indicators and option market activity suggest investors are bracing for near-term volatility.

Sectoral and Broader Market Implications

The IT - Software sector has been under pressure, with a 1-day decline of 3.73%, reflecting concerns over global demand and margin pressures. TCS’s underperformance relative to the sector and Sensex highlights company-specific challenges, possibly linked to earnings expectations or macroeconomic uncertainties.

Liquidity remains adequate, with the stock’s average traded value supporting trade sizes of up to ₹22.46 crores, ensuring that institutional investors can manoeuvre positions without excessive slippage. This liquidity is crucial given the large open interest in call options, which may translate into increased hedging or speculative activity as expiry approaches.

Interpreting the Call Option Positioning

The heavy call option volumes at the ₹2,900 and ₹3,000 strikes, both out-of-the-money relative to the current stock price, indicate a speculative or hedging interest in a potential upside move. The open interest at ₹3,000 is particularly telling, with over 16,000 contracts outstanding, suggesting that traders are positioning for a rebound above this psychologically significant level.

Such activity could be driven by expectations of positive earnings surprises, contract wins, or sectoral tailwinds that might emerge before the February expiry. Alternatively, some market participants may be using these calls as part of spread strategies to hedge downside risk while maintaining upside exposure.

Given the stock’s recent weakness and the broader sectoral challenges, this call option interest may also reflect a contrarian bet by sophisticated investors anticipating a technical bounce or a short squeeze scenario.

Outlook and Investor Considerations

Investors should weigh the mixed signals from TCS’s price action and options market carefully. While the stock’s fundamentals and dividend yield remain attractive, the technical breakdown and falling investor participation caution against aggressive long positions at current levels.

Those considering exposure to TCS might monitor the 24 February expiry closely, as the resolution of these large call option positions could trigger increased volatility. Additionally, comparing TCS with other large-cap software and consulting firms may reveal more favourable risk-reward profiles, especially given the recent Mojo rating upgrade to 'Hold' from 'Sell'.

In summary, TCS’s heavy call option activity amid a bearish price environment underscores a nuanced market outlook, blending cautious optimism with tactical hedging and speculative positioning.

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