The Put-Call Ratio (PCR) by Open Interest is calculated by dividing the total open interest in put options by the total open interest in call options for a given underlying and expiry. A PCR above 1 indicates more put OI than call OI — suggesting either bearish sentiment or heavy hedging activity by institutional investors. A PCR significantly below 1 indicates call-heavy positioning, suggesting bullish sentiment. Contrarian traders often interpret extreme PCR readings as reversal signals: an unusually high PCR (excessive fear) can precede a market rally, while an unusually low PCR (excessive complacency) can precede a correction. For Nifty, the PCR is widely tracked as a sentiment gauge and forms a key input into options market analysis.
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