Varun Beverages Sees Heavy Put Option Activity Amid Bearish Market Sentiment

Heavy Put Option Trading Highlights Bearish Sentiment

On 3 February 2026, Varun Beverages emerged as the most active stock in put options trading, with 12,995 contracts changing hands at the ₹450 strike price. This activity generated a turnover of approximately ₹1,480.94 lakhs, underscoring the substantial interest in downside protection or speculative bearish bets. The open interest for these puts stands at 1,748 contracts, indicating a sustained build-up of positions ahead of the February expiry.

The underlying stock closed at ₹444.00, just 4.99% above its 52-week low of ₹419.55, reflecting a precarious position near its yearly trough. This proximity to the low, combined with the heavy put activity, suggests that market participants are bracing for further downside or are actively hedging existing long exposures.

Price Action and Volatility Context

Varun Beverages has underperformed its sector by 3.79% on the day, with a one-day return of -4.43% compared to the sector’s -0.80%. Over the past three consecutive sessions, the stock has declined by 6.29%, signalling sustained selling pressure. Despite opening with a gap-up of 2.72% on the day, the stock experienced a wide intraday trading range of ₹51.55, touching a high of ₹492.15 and a low of ₹440.60. This intraday volatility of 5.27% (calculated from the weighted average price) highlights the heightened uncertainty among investors.

Notably, the weighted average price indicates that more volume was traded closer to the lower end of the day’s range, reinforcing the bearish undertone. The stock is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — which typically signals a negative technical trend and weak investor sentiment.

Investor Participation and Liquidity Considerations

Investor participation appears to be waning, with delivery volumes on 2 February falling by 28.72% compared to the five-day average, registering at 25.62 lakh shares. This decline in delivery volume may indicate reduced conviction among buyers or increased short-term trading activity rather than long-term accumulation. However, liquidity remains adequate for sizeable trades, with the stock’s average traded value supporting transactions up to ₹5.92 crore comfortably.

Mojo Score and Rating Update

Varun Beverages currently holds a Mojo Score of 50.0, placing it in the 'Hold' category. This represents an upgrade from its previous 'Sell' rating as of 26 November 2025. Despite this improvement, the stock’s market cap grade remains at 1, reflecting its large-cap status with a market capitalisation of ₹1,60,222 crore. The rating upgrade suggests some stabilisation in fundamentals or valuation, but the persistent bearish option activity and price weakness indicate caution among traders.

Expiry Patterns and Strike Price Concentration

The concentration of put option activity at the ₹450 strike price, which is slightly above the current market price, is telling. This strike acts as a psychological and technical support level for traders. The expiry date of 24 February 2026 is just over three weeks away, a timeframe that often sees increased hedging and speculative positioning as investors adjust portfolios ahead of quarterly results or macroeconomic events.

Such heavy put buying at this strike price may be interpreted as a hedge against further declines or as a directional bet anticipating a drop below ₹450. The open interest build-up suggests that many investors are either protecting long positions or speculating on a bearish move, which could lead to increased volatility as expiry approaches.

Sector and Market Comparison

While Varun Beverages has been underperforming its sector, which itself declined by 0.80% on the day, the broader Sensex index gained 2.80%. This divergence highlights the stock-specific challenges faced by VBL, possibly linked to company fundamentals, competitive pressures, or sector rotation. The beverages sector generally enjoys defensive characteristics, but the recent price action and option market behaviour suggest that investors are reassessing risk in this space.

Implications for Investors and Traders

The surge in put option volumes and open interest at a strike price near the current market level signals a cautious or bearish stance among market participants. Investors holding Varun Beverages shares should be mindful of the technical weakness and the potential for further downside, especially given the stock’s proximity to its 52-week low and its failure to sustain gains above key moving averages.

Traders may view the elevated put activity as an opportunity to either hedge existing long positions or to speculate on a decline, particularly as the 24 February expiry approaches. The wide intraday price swings and high volatility also suggest that risk management will be crucial in the near term.

Meanwhile, the recent upgrade in Mojo Grade from Sell to Hold indicates some underlying improvement, but the overall sentiment remains mixed. Investors should closely monitor upcoming earnings, sector developments, and broader market trends before making significant portfolio adjustments.

Conclusion

Varun Beverages Ltd’s current market dynamics, characterised by heavy put option trading, elevated volatility, and technical weakness, reflect a cautious outlook among investors. While the stock has seen a rating upgrade, the persistent bearish positioning in the options market and its underperformance relative to peers warrant careful analysis. Market participants should weigh the risks and consider hedging strategies or alternative investments within the beverages sector or broader market.

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