Tata Consultancy Services Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

Data from the latest derivatives market reveals that TCS’s put options have been the most actively traded among its peers, with significant volumes concentrated at strike prices ranging from ₹2,800 to ₹3,100. The underlying stock closed at ₹3,057.7 on 4 February 2026, trading below key moving averages including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, underscoring a bearish technical setup.

Specifically, the 24 February expiry put options at the ₹3,000 strike saw the highest number of contracts traded, totalling 7,296 contracts with a turnover of ₹554.39 lakhs and an open interest of 3,281 contracts. Close behind, the ₹3,100 strike put options recorded 3,970 contracts traded with a turnover of ₹639.73 lakhs and an open interest of 2,998 contracts. The ₹2,900 and ₹2,800 strike puts also attracted substantial activity, with 3,113 and 2,662 contracts traded respectively, indicating a broad-based bearish sentiment across multiple strike prices.

Market Context and Price Action

TCS’s stock performance today was in line with the broader IT - Software sector, which declined by 4.96%. The stock opened with a gap down of 3.26% and touched an intraday low of ₹3,031.2, representing a 6.02% drop from the previous close. The weighted average price of traded volumes skewed closer to the day’s low, suggesting selling pressure dominated trading sessions. Despite this, the stock maintains a high dividend yield of 3.38%, which may provide some cushion for long-term investors amid volatility.

Investor participation has notably increased, with delivery volumes rising by 24.49% to 26.5 lakh shares on 3 February compared to the five-day average. This heightened activity indicates that market participants are actively repositioning their portfolios in response to recent price movements and sector dynamics.

Bearish Positioning and Hedging Implications

The concentration of put option contracts at and above the current market price suggests that investors are either hedging existing long positions or speculating on further downside. The open interest figures, particularly at the ₹3,000 and ₹3,100 strikes, indicate that these levels are key psychological and technical support zones where traders expect significant price action.

Given TCS’s recent downgrade from a Sell to a Hold rating on 22 April 2025, with a Mojo Score of 57.0, the market appears to be cautiously awaiting clearer directional cues. The stock’s large market capitalisation of ₹11,66,363 crore and its liquidity profile, capable of handling trade sizes up to ₹20.73 crore based on 2% of the five-day average traded value, make it a preferred instrument for institutional hedging strategies.

Moreover, the day’s return of -5.11% for TCS slightly underperformed the sector’s decline of -4.92%, while the Sensex managed a modest gain of 0.16%, highlighting sector-specific pressures rather than broad market weakness.

Technical and Fundamental Considerations

Technically, TCS’s trading below all major moving averages signals a bearish trend, which is corroborated by the heavy put option activity. The strike prices chosen by traders reflect a range where downside risk is being actively managed or anticipated. Investors should monitor the 24 February expiry closely, as option expiry often leads to increased volatility and potential price swings.

Fundamentally, while TCS remains a large-cap leader with a respectable dividend yield, the recent rating upgrade from Sell to Hold suggests some stabilisation in outlook, though not yet a full recovery in investor confidence. The company’s performance relative to sector peers and broader market indices will be critical in shaping near-term sentiment.

Investor Takeaways

For investors, the current environment suggests caution. The heavy put option volumes at multiple strike prices indicate a market expectation of potential downside or at least heightened volatility in TCS shares over the coming weeks. Those holding long positions may consider protective strategies such as buying puts or tightening stop-loss levels. Conversely, traders with a bearish outlook might view the elevated put activity as confirmation of downside momentum and an opportunity to position accordingly.

It is also prudent to watch the broader IT sector and macroeconomic indicators, as sectoral weakness has been a significant driver of TCS’s recent price action. The stock’s liquidity and large market cap make it a key bellwether for investor sentiment in the software and consulting space.

In summary, the surge in put option trading ahead of the 24 February expiry highlights a cautious or bearish stance among market participants towards Tata Consultancy Services Ltd. This activity, combined with technical weakness and sectoral headwinds, suggests that investors should remain vigilant and consider hedging or risk management strategies in the near term.

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