Max pain is the strike at which the largest quantity of FIN NIFTY options would expire worthless, so option buyers as a group lose the most and writers pay out the least. It is worked out from the NSE FIN NIFTY option chain: for every candidate settlement price you total the intrinsic value owed on all in-the-money calls and puts weighted by their open interest, and the strike where that total is smallest is the max pain strike.
FIN NIFTY covers the wider financial-services basket — banks, NBFCs, insurers and housing finance — so it reacts to rate, credit and policy news. The level moves as open interest shifts during the day, and it is a tendency rather than a rule — a strong trend, an event or a news shock will override it. It is most useful close to expiry and read together with the FIN NIFTY open interest and Put Call Ratio, both linked above.