Put-Call Ratio (PCR)
A single number that captures the balance between Put and Call activity — one of the most watched sentiment gauges in Indian options markets.
Definition
The Put-Call Ratio (PCR) is the ratio of total Put open interest (or volume) to total Call open interest (or volume) for a given underlying and expiry. In India's F&O markets it is most widely tracked for Nifty 50 index options, and to a lesser extent for Bank Nifty, FinNifty, and individual F&O stocks. A PCR above 1 means more Put activity than Call activity; a PCR below 1 means Calls dominate. The ratio is published by NSE in end-of-day OI data, and most option chain tools calculate it dynamically across expiry cycles.
Why it matters
PCR is used as both a directional sentiment indicator and a contrarian indicator, and understanding which lens to apply in which market phase is key. In trending markets, a rising PCR during a rally can simply reflect hedgers buying Puts to protect long portfolios — this is normal and does not necessarily signal bearishness. In a sideways or range-bound market, an extremely high PCR often signals excessive fear, which contrarian traders read as a potential mean-reversion bottom.
Conversely, a very low PCR — below roughly 0.7 in Nifty options — can indicate complacency, with too many participants positioned bullishly through Calls. Contrarians read this as a potential top. However, these ranges are not fixed rules; they vary with volatility regimes, expiry proximity, and macro event calendars. NSE's India VIX rising alongside a high PCR is a stronger bearish signal than either alone.
One structural quirk of NSE's options market is that institutional participants — especially mutual funds and insurance companies — routinely buy Puts as portfolio insurance, regardless of their underlying view. This creates a structural floor for PCR that is not purely sentiment-driven. For this reason, many professional traders prefer PCR-OI (based on open interest) over PCR-Volume (based on intraday traded volume), since OI reflects sustained positioning rather than intraday speculative churn.
Formula
PCR (OI-based) = Total Put Open Interest ÷ Total Call Open Interest
PCR (Volume-based) = Total Put Volume ÷ Total Call Volume
Both can be computed across all strikes for a single expiry (expiry-wise PCR) or across all expiries for a given underlying (total PCR). Expiry-wise PCR is more useful for tactical weekly plays; total PCR better reflects structural sentiment across rolling positions.
Example
Suppose on a given Thursday, Nifty weekly options (expiring that day) show total Put OI of 2,40,000 contracts and total Call OI of 1,80,000 contracts. The PCR-OI for that expiry is 2,40,000 ÷ 1,80,000 = 1.33. Meanwhile, the next week's expiry shows Put OI of 90,000 and Call OI of 1,10,000, giving a PCR of 0.82. A trader reading this would note that the near expiry is heavily Put-heavy — likely a mix of hedgers protecting positions through the weekly settlement — while the next expiry leans Call-heavy, suggesting participants are positioning for a modest continuation of the uptrend post-expiry. Without additional context — price trend, OI buildup vs. unwinding at key strikes, India VIX level — neither number alone is actionable.
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