Tata Consultancy Services Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 24 February 2026 expiry, TCS recorded substantial put option volumes at strike prices of ₹2,640, ₹2,600, and ₹2,580. The most active contract was the ₹2,600 strike put, with 6,261 contracts traded, generating a turnover of approximately ₹136.5 lakhs and an open interest of 2,761 contracts. Close behind was the ₹2,580 strike put with 3,668 contracts traded and an open interest of 1,032. The ₹2,640 strike put also saw 2,748 contracts traded, with open interest standing at 1,147.

Looking further ahead, the 30 March 2026 expiry saw even heavier activity, particularly at the ₹2,600 strike put option. This contract recorded 5,295 contracts traded, with a turnover exceeding ₹815.8 lakhs and a notably high open interest of 4,809 contracts. This concentration of open interest at the ₹2,600 strike price for both near and mid-term expiries suggests a strong market consensus around this level as a critical support or hedging threshold.

Stock Price and Market Context

TCS closed at ₹2,588.7, just 0.43% above its 52-week low of ₹2,585, underscoring the stock’s vulnerability. The share price has declined by 3.35% over the past two trading sessions, underperforming the IT - Software sector, which itself fell by 3.12%, and the broader Sensex, which declined by 0.89% on the same day. Intraday lows touched ₹2,595.1, reflecting persistent selling pressure.

Technically, TCS is trading below all major moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — indicating a bearish trend across multiple timeframes. This technical weakness aligns with the surge in put option activity, as investors seek downside protection or speculate on further declines.

Despite the bearish momentum, the stock offers a relatively high dividend yield of 4.07%, which may provide some cushion for long-term investors. However, the recent rise in delivery volumes to 33.31 lakh shares on 23 February, a 137.07% increase over the five-day average, suggests rising investor participation amid the sell-off, possibly reflecting portfolio rebalancing or hedging strategies.

Investor Sentiment and Hedging Implications

The concentration of put option activity at strike prices slightly above the current market price suggests that investors are positioning for potential downside or are actively hedging existing long exposures. The ₹2,600 strike, in particular, acts as a focal point for protection, with open interest levels indicating significant outstanding contracts that could influence price dynamics as expiry approaches.

Such elevated put volumes often reflect a cautious or bearish outlook, especially when combined with the stock’s technical weakness and recent price declines. Institutional investors and traders may be using these options to mitigate risk amid broader sectoral headwinds or company-specific concerns.

It is also notable that the turnover for the 30 March expiry ₹2,600 strike put option is substantially higher than near-term expiries, suggesting that some market participants are extending their hedging horizon or speculating on a prolonged period of weakness.

Fundamental and Market Grade Assessment

TCS, a large-cap leader in the Computers - Software & Consulting industry, currently holds a Market Cap Grade of 1, reflecting its substantial market capitalisation of ₹9,68,146 crores. The company’s Mojo Score stands at 51.0 with a Mojo Grade of Hold, upgraded from Sell on 22 April 2025. This upgrade indicates a modest improvement in the company’s outlook, though the grade remains cautious.

Despite the recent downgrade in stock price and sectoral weakness, TCS’s fundamentals remain robust, supported by its market leadership and dividend yield. However, the prevailing bearish sentiment in options markets signals that investors are wary of near-term risks, possibly linked to macroeconomic uncertainties or sector-specific challenges.

Expiry Patterns and Market Impact

The clustering of put option activity around the 24 February and 30 March 2026 expiries highlights key dates for potential volatility in TCS’s share price. As these expiry dates approach, the unwinding or rolling over of put positions could lead to increased price swings, especially if the stock remains below or near the critical ₹2,600 strike level.

Market makers and institutional traders often adjust their hedges around these expiries, which can amplify price movements. Investors should monitor open interest trends and volume changes closely to gauge shifts in market sentiment and potential support or resistance levels.

Outlook for Investors

For investors, the current environment suggests a cautious approach to TCS shares. While the company’s fundamentals and dividend yield provide some support, the technical weakness and heavy put option activity indicate that downside risks remain elevated in the near term.

Those holding long positions may consider protective strategies such as buying puts or tightening stop-loss levels. Conversely, traders with a bearish outlook might find opportunities in the elevated put option liquidity and open interest to express downside views or hedge broader portfolio exposures.

Given the stock’s liquidity—capable of handling trade sizes up to ₹20 crores based on recent average traded value—active traders can execute sizeable option and equity trades without significant market impact.

Conclusion

Tata Consultancy Services Ltd. is currently navigating a challenging phase marked by technical weakness and increased bearish positioning in the options market. The surge in put option volumes and open interest at key strike prices near ₹2,600, combined with the stock’s proximity to its 52-week low, underscores investor caution and hedging activity.

While the company’s fundamentals remain solid and its Mojo Grade has improved to Hold, the prevailing market sentiment suggests that investors should remain vigilant and consider risk management strategies as expiry dates approach. Monitoring option market dynamics alongside price action will be crucial for anticipating potential volatility and making informed investment decisions.

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