Tata Consultancy Services Sees Surge in Put Option Activity Amid Bearish Hedging

Put Option Activity Highlights

On 1 February 2026, TCS recorded a remarkable 8,338 put option contracts traded with a strike price of ₹3,100, generating a turnover of ₹536.97 lakhs. The open interest for these puts stands at 2,870 contracts, indicating sustained investor interest in downside protection or speculative bearish bets. This activity is particularly significant given the underlying stock price of ₹3,200, placing the ₹3,100 strike roughly 3.1% below current levels.

The expiry date of 24 February 2026 is just over three weeks away, a timeframe that often sees increased option activity as traders position themselves ahead of quarterly earnings, macroeconomic data releases, or sector-specific developments. The heavy put volume at this strike price may reflect a cautious stance amid broader market uncertainties or sector rotation pressures.

Stock Performance and Technical Context

Contrary to the bearish undertones implied by put buying, TCS has demonstrated resilience in recent sessions. The stock outperformed its sector by 1.47% today, gaining 2.96% against the sector’s 1.21% rise and the Sensex’s 1.07% decline. It reversed a two-day losing streak, touching an intraday high of ₹3,234, a 3.52% increase from the previous close.

Technically, TCS is trading above all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a robust uptrend. Rising delivery volumes, with 21.4 lakh shares delivered on 30 January, represent a 14.3% increase over the five-day average, underscoring growing investor participation and confidence in the stock’s near-term prospects.

Fundamental and Market Positioning

TCS remains a heavyweight in the Computers - Software & Consulting sector, boasting a market capitalisation of ₹11,30,960 crores, firmly placing it in the Large Cap category. The company’s Mojo Score has improved to 57.0, earning a Hold rating, upgraded from Sell on 22 April 2025. Despite this moderate rating, the stock offers a healthy dividend yield of 3.49%, attractive for income-focused investors amid volatile markets.

Liquidity metrics also support active trading, with the stock’s average traded value allowing for sizeable trade sizes up to ₹19.24 crores without significant market impact. This liquidity is crucial for options traders who require efficient entry and exit points.

Interpreting the Put Option Surge: Hedging or Bearish Sentiment?

The spike in put option volume at the ₹3,100 strike price can be interpreted in multiple ways. On one hand, it may represent hedging activity by institutional investors or large shareholders seeking to protect gains after recent price appreciation. Given TCS’s strong technical positioning and dividend yield, prudent investors might be buying puts as insurance against a potential correction or sector-wide weakness.

On the other hand, the volume could indicate speculative bearish bets anticipating a pullback. The ₹3,100 strike is a psychologically important level, and a breach below it could trigger further selling pressure. The open interest of 2,870 contracts suggests that this strike price is a focal point for market participants, possibly reflecting a consensus on a near-term support level.

Expiry Patterns and Market Implications

With the 24 February expiry approaching, option traders will closely monitor price action around the ₹3,100 strike. If the stock remains above this level, many put options may expire worthless, benefiting option sellers. Conversely, a decline below ₹3,100 could lead to increased volatility as put holders exercise or close positions, potentially amplifying downward momentum.

Investors should also consider broader market conditions. The Sensex’s negative return today contrasts with TCS’s outperformance, highlighting sector-specific strength but also the risk of market divergence. Macro factors such as global economic data, IT spending trends, and currency fluctuations could influence TCS’s trajectory in the coming weeks.

Comparative Sector and Market Analysis

Within the Computers - Software & Consulting sector, TCS’s current Mojo Grade of Hold reflects a cautious stance relative to peers. The upgrade from Sell to Hold on 22 April 2025 indicates improving fundamentals and trend stability, yet the score of 57.0 suggests room for further improvement before a Buy rating is warranted.

Market cap grade of 1 confirms TCS’s status as a large-cap stalwart, but investors should weigh this against emerging mid-cap and small-cap opportunities that may offer higher growth potential albeit with greater risk. The sector’s overall performance today, with a 1.21% gain, was modest compared to TCS’s 2.96% rise, underscoring the company’s relative strength.

Investor Takeaways and Outlook

For investors, the heavy put option activity at the ₹3,100 strike price serves as a cautionary signal to monitor risk closely. While TCS’s fundamentals and technicals remain robust, the options market is signalling a degree of uncertainty or hedging demand that should not be ignored.

Long-term holders may view the current dip as an opportunity to accumulate, supported by the attractive dividend yield and strong market position. Conversely, traders and short-term investors should watch price action around the put strike and expiry date for clues on potential volatility and directional shifts.

Ultimately, TCS’s blend of steady earnings, large-cap liquidity, and active options market makes it a key stock to watch in the coming weeks as investors balance optimism with prudent risk management.

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