The Put Call Ratio (PCR) is one of the most widely used indicators in Nifty trading. It helps traders understand whether the market sentiment is leaning toward bullish (more calls) or bearish (more puts). If you are an intraday trader, options trader, or long-term investor in Nifty, knowing how to use PCR effectively can help you avoid traps and time your trades better.
In this blog, we’ll explain what PCR is, how it works, its calculation, and how to use PCR in Nifty trading strategies.
What is Put Call Ratio (PCR)?
The Put Call Ratio (PCR) is a market sentiment indicator that compares the trading volume of put options vs call options.
-
If PCR > 1 → More puts are being traded than calls → Market sentiment is bearish.
-
If PCR < 1 → More calls than puts → Market sentiment is bullish.
-
If PCR = 1 → Neutral market sentiment.
Formula for PCR:
PCR=Put Open Interest (OI)Call Open Interest (OI)\text{PCR} = \frac{\text{Put Open Interest (OI)}}{\text{Call Open Interest (OI)}}PCR=Call Open Interest (OI)Put Open Interest (OI)
How to Interpret PCR in Nifty Trading
Here’s how traders read the PCR values for Nifty option chain:
-
PCR < 0.7 → Overly bullish sentiment (possible reversal downward).
-
PCR 0.7 – 1.0 → Neutral range-bound trading.
-
PCR 1.0 – 1.3 → Moderately bearish sentiment.
-
PCR > 1.3 → Extremely bearish, may trigger short covering rally.
Extreme PCR values usually indicate market reversal zones.
How to Use PCR in Nifty Trading
1. Intraday Trading with PCR
-
Track Nifty PCR live on NSE or broker dashboards.
-
A sharp rise in PCR indicates heavy put buying → expect market weakness.
-
A fall in PCR indicates call buying → bullish momentum.
-
Combine PCR with candlestick patterns or VWAP for confirmation.
2. Swing Trading Strategy with PCR
-
For Nifty positional traders, check daily PCR trend.
-
A rising PCR over multiple sessions → possible bearish trend continuation.
-
A falling PCR consistently → bullish momentum building.
-
Best used with support & resistance levels.
3. Options Trading Strategy with PCR
-
If PCR is very high (>1.5) → avoid fresh shorts, market may bounce.
-
If PCR is very low (<0.7) → avoid chasing longs, profit booking may come.
-
Use PCR to select strike prices in Nifty options.
PCR in Nifty Option Chain Example
Suppose on a given trading day:
-
Put OI = 12 lakh contracts
-
Call OI = 10 lakh contracts
PCR = 12 ÷ 10 = 1.2 → Market shows bearish sentiment, but not extreme.
Limitations of PCR
-
PCR alone is not a buy or sell signal.
-
Works best when combined with technical indicators like RSI, MACD, or option chain analysis.
-
Sudden news/events (Budget, RBI policy, Fed rates) can override PCR signals.
FAQs on PCR in Nifty Trading
Q1: What is a good PCR for Nifty?
A PCR between 0.7 to 1.2 is considered normal. Values beyond this range may indicate extremes.
Q2: Can PCR predict Nifty reversals?
Yes, extreme PCR values often signal contrarian trading opportunities.
Q3: Where can I check Nifty PCR ratio live?
You can check on NSE India, MoneyControl, TradingView, or broker apps.
Q4: Is PCR useful for Bank Nifty too?
Yes, traders use Bank Nifty PCR alongside Nifty PCR for better market sentiment analysis.
The Put Call Ratio (PCR) is a powerful sentiment tool in Nifty trading. It helps traders judge whether the market is overbought or oversold. However, PCR should not be used in isolation. Combine it with technical analysis, option chain data, and news flow for accurate decisions.
By mastering PCR, you can avoid false breakouts, time your entries better, and build a more reliable trading strategy in 2025.
Disclaimer
This blog is for educational purposes only. It does not provide investment advice or recommendations. Trading in Nifty and options carries risks. Please consult your financial advisor before investing.
