Vedanta Ltd Sees Heavy Put Option Activity Amid Bearish Sentiment

Heavy Put Option Trading Highlights Bearish Sentiment

Data from the derivatives market reveals that Vedanta Ltd. (VEDL) has emerged as the most active stock in put options trading for the expiry dated 27 January 2026. The strike prices attracting the highest volumes are ₹600, ₹610, and ₹580, with the ₹600 strike leading the pack. Specifically, 4,547 contracts were traded at the ₹600 strike, generating a turnover of ₹727.88 lakhs and an open interest of 2,693 contracts. The ₹610 strike saw 2,539 contracts traded with a turnover of ₹529.37 lakhs and open interest of 1,033, while the ₹580 strike recorded 2,088 contracts with a turnover of ₹165.20 lakhs and open interest of 1,439.

This concentrated activity in put options at strikes close to the current underlying price of ₹605.10 suggests that market participants are positioning for potential downside or are actively hedging existing long exposures. The substantial open interest at these strikes indicates that these are not merely speculative trades but likely reflect genuine risk management strategies or bearish bets.

Stock Performance and Market Context

Vedanta Ltd. closed recently at ₹605.10, approximately 4.5% below its 52-week high of ₹629.90. The stock has outperformed its sector by 0.55% on the day, despite a 3.01% decline in its price, reflecting some resilience relative to the broader non-ferrous metals sector, which fell by 4.29%. However, the stock has experienced a trend reversal after two consecutive days of gains, touching an intraday low of ₹601.45, down 3.33% from the previous close.

Technical indicators show Vedanta trading above its 20-day, 50-day, 100-day, and 200-day moving averages, signalling a generally bullish medium- to long-term trend. However, it remains below its 5-day moving average, indicating short-term weakness. This mixed technical picture aligns with the increased put option activity, as traders may be hedging against near-term volatility while maintaining a longer-term bullish stance.

Investor Participation and Liquidity

Investor interest remains robust, with delivery volumes on 7 January rising by 66.57% to 63.98 lakh shares compared to the five-day average. This heightened participation underscores the stock’s liquidity and attractiveness to institutional and retail investors alike. The stock’s liquidity supports sizeable trades, with a 2% threshold of the five-day average traded value equating to approximately ₹11.16 crore, ensuring that large option and equity trades can be executed without significant market impact.

Mojo Score and Analyst Ratings

Vedanta Ltd. currently holds a strong Mojo Score of 81.0, reflecting robust fundamentals and positive market sentiment. The company’s Mojo Grade was upgraded from 'Buy' to 'Strong Buy' on 1 December 2025, signalling improved confidence among analysts and investors. The stock’s market capitalisation stands at a substantial ₹2,37,008.62 crore, categorising it as a large-cap entity within the non-ferrous metals industry.

Despite the recent price dip of 3.01% on the day, the stock’s dividend yield remains attractive at 3.7%, providing income-oriented investors with a compelling reason to maintain exposure. This combination of yield and growth potential underpins the strong buy rating and suggests that the current put option activity may be more tactical hedging rather than outright bearish conviction.

Expiry Patterns and Implications for January 2026

The expiry on 27 January 2026 is shaping up to be a critical juncture for Vedanta Ltd. The concentration of put option volumes at strikes just below and slightly above the current market price indicates that traders are bracing for potential volatility or a correction in the near term. The ₹600 strike, in particular, acts as a psychological support level, with the highest open interest and turnover, suggesting that many investors are either protecting profits or speculating on a pullback to this level.

Open interest data also reveals that the ₹580 strike, though lower in turnover, has a significant number of contracts outstanding, which could act as a secondary support zone if the stock price declines further. The ₹610 strike, slightly above the current price, indicates some hedging against a mild downside or a buffer zone for short-term traders.

Sectoral and Broader Market Comparison

Vedanta’s performance contrasts with the broader non-ferrous metals sector, which has declined by 4.29% on the day, and the Sensex, which was relatively flat with a marginal 0.17% loss. This relative outperformance, despite the put option activity, suggests that investors may be selectively cautious about Vedanta’s short-term prospects while maintaining a positive medium-term outlook.

The stock’s ability to maintain levels above key moving averages supports this view, indicating underlying strength amid sectoral weakness. However, the increased put option interest signals that market participants are not complacent and are actively managing risk in a potentially volatile environment.

Investor Takeaways and Outlook

For investors, the surge in put option activity in Vedanta Ltd. ahead of the January expiry is a clear signal to monitor the stock closely for near-term volatility. The strike prices with the highest open interest and turnover provide key levels to watch: ₹600 as primary support, ₹580 as a secondary support, and ₹610 as a short-term resistance or hedging zone.

While the stock’s strong fundamentals, attractive dividend yield, and upgraded Mojo Grade support a positive medium- to long-term outlook, the current market dynamics suggest caution. Traders and portfolio managers may consider protective strategies such as buying puts or employing collars to hedge against downside risk, especially given the broader sector weakness and recent price pullback.

Liquidity remains ample, allowing for efficient execution of sizeable trades without undue price impact, which is crucial for institutional investors managing large positions. The combination of technical strength and active options market interest makes Vedanta Ltd. a stock to watch closely in the coming weeks.

Conclusion

Vedanta Ltd.’s elevated put option volumes and open interest at strikes near the current market price underscore a cautious stance among investors, reflecting hedging and bearish positioning ahead of the January 2026 expiry. Despite this, the stock’s strong fundamentals, recent rating upgrade, and relative outperformance within its sector suggest that the bearish sentiment may be tactical rather than structural. Investors should balance the risks of near-term volatility with the company’s solid medium-term prospects when considering their exposure.

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