IDFC First Bank Sees Surge in Bearish Options Bets Ahead of Rs 590 Crore Fraud Revelation

IDFC First Bank Options Data Suggests Bearish Positions Ahead of Expiry and Fraud Disclosure

February 24, 2024

Market Recap

Options data for IDFC First Bank indicated a sharp build-up in bearish positions ahead of the February 24 expiry, prior to the lender's disclosure of a Rs 590 crore fraud in some Haryana government accounts. The data, which has gone viral, shows a strong bearish position, leading some to levy allegations of insider trading.

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Trading Activity

Data from the NSE for the Rs 85 strike put option shows a sharp jump in volumes on February 19, with over 2.68 crore contracts traded, higher than trading activity seen over the week. The premium for the same contract also saw a spike, with traded value crossing Rs 2.3 crore, indicating a bearish bet.

Price Action

The Rs 85 put option saw very volatile price action in the sessions leading up to February 20. The premium, which had been hovering between Rs 3.50 and Rs 4.25 earlier in the week, fell sharply to as low as Rs 0.42 on February 19 before rebounding to close higher. On February 20, the contract settled at Rs 1.82, with nearly 20 lakh shares in volume, suggesting continued positioning.

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Brokerage Insights

According to Ajit Mishra, SVP - Research, Religare Broking, the texture of the trading activity over the week looked normal, with the only unusual thing being the sharp spike in volumes on February 19. He noted that the reason for such trading activity was seen around the Rs 85 strike price, as it was around the current market price at the time.

Stock Performance

Shares of IDFC First Bank fell nearly 19% after the lender disclosed a Rs 590 crore fraud committed by its employees and others in accounts held by the Haryana government with the private sector lender. The amount under reconciliation is equivalent to roughly 0.9% of the bank's net worth and about 20% of its fiscal 2026 pre-tax profit, according to brokerage estimates.