Tata Consultancy Services Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Surge Highlights Investor Caution

On 23 February 2026, TCS recorded the most active put options trading at the 2,600 strike price, with 3,187 contracts changing hands. This surge in put volume generated a turnover of approximately ₹19.19 lakhs, while open interest stood at 4,480 contracts. The underlying stock price closed at ₹2,685, hovering just 4.04% above its 52-week low of ₹2,585, underscoring the proximity to a critical support level that market participants are closely monitoring.

The concentration of put options at the 2,600 strike price, which is slightly below the current market price, indicates a strategic hedging approach or outright bearish bets by traders anticipating a potential downside move in the near term. This activity is particularly notable given the expiry date is imminent, set for 24 February 2026, suggesting that investors are positioning themselves for volatility or a correction in the stock.

Technical Indicators Paint a Bearish Picture

From a technical standpoint, TCS is trading below its key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This consistent underperformance relative to these benchmarks often signals weakening momentum and can trigger defensive positioning among investors. The stock has, however, managed to outperform its sector by 0.44% on the day, and it has recorded two consecutive days of gains, accumulating a modest 0.6% return over this period.

Despite these short-term gains, the broader trend remains subdued, with falling investor participation evident from a 52.02% decline in delivery volume on 20 February 2026 compared to the five-day average. This drop in delivery volume to 10.55 lakh shares suggests reduced conviction among buyers, which may be contributing to the increased demand for put options as a protective measure.

Fundamental Context and Market Capitalisation

TCS remains a dominant player in the Computers - Software & Consulting industry, boasting a market capitalisation of ₹9,71,456.50 crores, categorising it firmly as a large-cap stock. The company’s Mojo Score currently stands at 51.0, reflecting a Hold rating, an improvement from a previous Sell grade assigned on 22 April 2025. This upgrade suggests some stabilisation in fundamentals or market perception, although the overall outlook remains cautious.

Additionally, TCS offers a relatively attractive dividend yield of 4.06%, which may appeal to income-focused investors despite the recent volatility. Liquidity remains robust, with the stock capable of supporting trade sizes up to ₹18.29 crores based on 2% of the five-day average traded value, ensuring that institutional and retail investors can transact without significant price impact.

Options Market as a Barometer of Sentiment

The heavy put option activity at the 2,600 strike price ahead of expiry is a clear indication that market participants are either hedging existing long positions or speculating on a near-term decline. Open interest of 4,480 contracts at this strike is substantial, signalling that these positions are not merely transient but represent a meaningful portion of the options market for TCS.

Given the underlying stock price is currently ₹2,685, the 2,600 strike puts are slightly out-of-the-money, which typically attract traders looking for downside protection with limited upfront premium costs. This pattern is consistent with a cautious stance amid uncertain macroeconomic conditions or sector-specific headwinds affecting the software and consulting space.

Sector and Broader Market Comparison

While TCS’s one-day return was a marginal decline of 0.04%, it outperformed the sector’s 0.57% drop and lagged behind the Sensex’s 0.64% gain on the same day. This relative resilience highlights the stock’s defensive qualities within the technology space, even as investors express caution through options positioning.

The Computers - Software & Consulting sector has faced headwinds from global economic uncertainties and shifting IT spending patterns, which have pressured valuations and increased volatility. TCS’s current trading below all major moving averages reflects this challenging environment, reinforcing the rationale behind the increased put option interest as a risk management tool.

Investor Takeaway and Outlook

Investors should interpret the heavy put option activity as a signal of heightened caution rather than outright bearish conviction. The stock’s Hold rating and recent upgrade from Sell indicate that while risks remain, there is potential for stabilisation or recovery if sector conditions improve. The attractive dividend yield and large-cap status provide some defensive appeal, but the technical weakness and falling delivery volumes warrant careful monitoring.

For traders, the 2,600 strike puts offer a focal point for hedging strategies or speculative plays on downside risk ahead of the 24 February expiry. Long-term investors may prefer to watch for confirmation of a trend reversal before increasing exposure, given the current subdued momentum and investor participation.

Conclusion

Tata Consultancy Services Ltd. is currently navigating a complex market environment characterised by cautious investor sentiment and technical weakness. The pronounced put option activity at the 2,600 strike price ahead of expiry underscores the market’s hedging behaviour and anticipation of potential downside. While the stock maintains some fundamental strengths and sector leadership, the near-term outlook remains guarded, with investors advised to balance risk management with selective opportunity assessment.

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