Tata Consultancy Services Sees Heavy Put Option Activity Amid Bearish Sentiment

Intense Put Option Trading Highlights Bearish Hedging

Data from the derivatives market reveals that TCS has emerged as the most active stock in put options trading, with three key strike prices attracting substantial volumes. The 3200 strike price saw the highest number of contracts traded at 4,501, generating a turnover of approximately ₹358.23 lakhs and an open interest of 4,221 contracts. Close behind, the 3240 strike price recorded 2,593 contracts traded with a turnover of ₹295.95 lakhs and open interest of 2,206. The 3260 strike price also attracted significant activity, with 2,073 contracts traded and a turnover of ₹261.89 lakhs, alongside an open interest of 2,149.

These strike prices cluster just below the current underlying value of ₹3,233.6, indicating that market participants are positioning for a potential downside or hedging existing long exposures. The concentration of open interest near these levels suggests that traders are bracing for volatility as the expiry date approaches.

Price Action and Technical Context

TCS’s share price has underperformed its sector by 1.02% today, falling 1.90% compared to the sector’s 1.04% decline and the Sensex’s marginal 0.17% drop. The stock touched an intraday low of ₹3,223.5, down 2.19%, marking a reversal after two consecutive days of gains. While the price remains above the 5-day, 50-day, and 100-day moving averages, it is trading below the 20-day and 200-day averages, reflecting a mixed technical picture that may be contributing to cautious investor sentiment.

Investor participation has also waned, with delivery volumes on 7 January falling by 17.72% against the five-day average, signalling reduced conviction among buyers. Despite this, TCS maintains a high dividend yield of 3.88%, which could provide some support to the stock amid short-term volatility.

Mojo Score and Rating Upgrade Reflect Cautious Optimism

MarketsMOJO assigns TCS a Mojo Score of 65.0, upgrading its Mojo Grade from Sell to Hold as of 22 April 2025. This reflects a tempered outlook, recognising the company’s strong fundamentals and market position while acknowledging recent price weakness and sector headwinds. The Market Cap Grade remains at 1, underscoring TCS’s status as a large-cap heavyweight with a market capitalisation of ₹11,69,763.88 crores.

Despite the upgrade, the current trading environment suggests investors are hedging their bets, as evidenced by the heavy put option volumes. This hedging activity may be driven by concerns over near-term earnings volatility, global IT spending uncertainties, or broader market corrections impacting technology stocks.

Expiry Patterns and Investor Implications

The 27 January 2026 expiry date is attracting the bulk of put option activity, signalling that market participants are focusing on this near-term horizon for potential downside risk. The clustering of open interest and turnover at strike prices slightly below the current market price suggests a protective stance, possibly to guard against a pullback below the ₹3,200 level.

For investors, this pattern highlights the importance of monitoring option market dynamics as a leading indicator of sentiment shifts. The elevated open interest at these strikes could also lead to increased volatility around expiry, as traders adjust or unwind positions.

Sector and Market Comparison

Within the Computers - Software & Consulting sector, TCS’s underperformance today contrasts with a more modest sector decline of 1.04%. This relative weakness may be signalling sector rotation or profit-taking in large-cap IT stocks. The Sensex’s minor 0.17% fall further emphasises that TCS’s price action is more stock-specific rather than a reflection of broad market trends.

Liquidity remains robust, with the stock’s traded value supporting sizeable trade sizes up to ₹13.28 crores based on 2% of the five-day average traded value. This ensures that investors can execute sizeable transactions without significant market impact, an important consideration amid heightened option market activity.

Outlook and Strategic Considerations

Investors should weigh the current bearish signals from the options market against TCS’s strong dividend yield and large-cap stability. The stock’s mixed technical indicators suggest a consolidation phase rather than a decisive downtrend, but the heavy put option interest indicates that downside protection is a priority for many market participants.

For long-term investors, this may represent an opportunity to accumulate on dips, particularly if the broader IT sector stabilises. Conversely, traders and hedgers may look to utilise put options to manage risk or capitalise on potential volatility around the January expiry.

Monitoring open interest changes and strike price concentrations in the coming weeks will be crucial to gauge evolving market sentiment and potential price inflection points.

Summary

Tata Consultancy Services Ltd. is currently at a crossroads, with significant put option activity signalling cautious or bearish positioning ahead of the 27 January 2026 expiry. While the company’s fundamentals and dividend yield remain attractive, recent price weakness and technical signals have prompted investors to hedge downside risk. The interplay between option market dynamics and underlying price action will be key to watch as the expiry approaches, offering valuable insights for both long-term investors and short-term traders.

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