Sunday, September 19, 2010

Put Call Ratio and the Nifty

The definition of Put-Call Ratio (PCR) is as follows:
The ratio of the volume of put options traded to the volume of call options traded, which is used as an indicator of investor sentiment (bullish or bearish).
1 school of thought says that a high PCR means more number of Puts have been written and markets should go ahead. Another school of thought says the converse.
Lets go by the data in hand for past 1 year.The market has bottomed when PCR was around 0.8-0.9 and topped when it was 1.2 or above.
I have marked in black the instances where the PCR was above 1.2. At this point of time, the market remains flat for a day or 2 by which time the PCR comes down to lower level or the market tanks.
This last leg of rally, the PCR was low (below 1.2), thus allowing the markets to go higher. On Friday, it crossed the Danger mark of 1.2, thus indicating caution.
Going by that logic next week should be flat or down. Let us see what comes true.


  1. thanks nishit . this is a good logic and study .

  2. Dear Sir,

    Please forward me the PCR data (as per the chart)
    so that I can study deeply along with your swing values.

    My email id is

    Appreciate your time and efforts.

    Best regards,

  3. A Sell was generated on intra basis. For more reliability I take closing basis for second reversal point. Yes, but 1 of my indicators has generated a sell which is fairly reliable. A close below 5901 generates a clear sell today. Thanks for pointing it out.

  4. what should one do if nifty spot closes between 1st and 2nd reversal points as it closed on 23rd sept, 2010?

  5. That is a question of judgment.
    1 thing which can be done is exit the position and re-enter the next day which is a conservative approach. You may miss out on a few points but not lose anything. Aggressive approach is ignore first reversal and go by second one. Another approach is buy a hedge if closes in between the two.

  6. thank for such informative reply

  7. Dear Nishit, Thanks very useful information.

    1. Tday the PCR is 1.8 hence please confirm if it is safer to expect correction coming up ???
    2. Please confirm where can i get one year historical PCR data ?

    Thanks in anticipation


  8. I take it from NSE site -> F&O -> Markets Today. You can get the historical data also from here.