6. Key Takeaways on PCR Ratio & PCR Nifty

If you’re interested in options trading or want to grasp market sentiment, you’ve probably come across the terms put call ratio, PCR ratio, or PCR Nifty. Don’t worry–we’ll break them down in plain language.

1. What Is Put Call Ratio (PCR)?

The put call ratio, often shortened to PCR ratio, is a tool that shows how many put options are traded versus call options over a specific period.

Put options give the right to sell an asset at a set price.
Call options give the right to buy an asset at a set price.

So, PCR ratio = Total put volume ÷ Total call volume.

If PCR is above 1, more puts are being traded—suggesting traders are bearish or hedging.
If PCR is below 1, more calls are being traded—indicating a bullish bias.

2. Why PCR Matters in Trading

a. Market Sentiment Gauge

The PCR ratio acts like a mood meter. A high PCR might imply fear or uncertainty about a decline, while a low PCR suggests optimism.

b. Contrarian Signal

Many traders use PCR in a contrarian way:

A very high PCR (strong put volume) can be a bullish sign—because when everyone expects the market to drop, there’s room for a surprise rally.
A very low PCR might signal complacency and a possible dip ahead.

3. PCR Nifty: A Specific View on the Nifty Index

The PCR Nifty specifically refers to the put to call options ratio of the Nifty 50 index. Since Nifty is India’s benchmark index, its PCR gives us clues about how traders feel about the broader market.

For example, if the PCR Nifty is at 1.2, it means there are 20% more put options than calls—flashing caution. If it’s 0.8, the balance favors calls, showing bullish sentiment.

4. Using PCR Ratio in Your Trading Strategy

Here’s how traders typically use the PCR ratio or PCR Nifty in real scenarios:

Identify extremes
- PCR above 1.2–1.3 could signal overly bearish sentiment.
- PCR below 0.7–0.8 could indicate excessive bullishness.
Look for confirmation
Combine the ratio with technical tools like RSI or moving averages before making a move.
Plan your entry/exit
- High PCR: Consider buying dips, as excessive fear may be overdone.
- Low PCR: Be cautious, lock in profits, or protect positions against potential reversals.

5. Example: PCR Nifty in Action

Let’s say today PCR Nifty reads 1.3, and Nifty is hovering near 18,000. That means put trading is 30% higher than calls—showing traders are nervous about a potential down-move.

A smart trader might:

Pause on fresh buys since sentiment is leaning negative.
Watch for a bounce if PCR remains high but Nifty holds steady.
Or even buy a protective put if they’re already invested.