Put-Call ratio dip indicates bullish sentiment

At a time when oil and gas sector stocks, along with banking and information technology companies, continue to hog the limelight on the 30-share BSE Sensitive Index, buyers on the National Stock Exchange (NSE) are outnumbering sellers and positively impacting the market.

In fact, the put-call ratio of the stock options market on the NSE decreased to 0.14 in June, from 0.15 in the first month of the year after reaching a highest level of 0.20 in March.

This plunge reflects a bullish sentiment, as the put-call ratio is one of the best gauges to judge oversold (too bearish) or overbought (too bullish) zones.

Utpal Chaudhary, V-P, IDBI Capital said, “Sentiment has been positive over the period and that resulting into lower put-call ratio.” Here buyers have the right but not the obligation to sell the underlying security at a pre-determined price (called the strike or exercise price) on or before a particular date (expiry date).

The volume of call options have decreased from 98.86 crore in January, to 64.53 crore in March.

The volume reached a higher level of 109.00 crore in June. Call option is an agreement that gives an investor the right—not the obligation—to buy a stock, bond, commodity, or other instrument at a specified price within a particular time period.

As far as volume of put options is concerned, it decreased from 15.16 crore in January, to 13.16 crore in March. It went northward to 15.46 crore in June.

Similarly, in terms of value, call options showed a steady decline from Rs 16,704 crore in January, to Rs 9,530 crore in March. It increased to Rs 18,359 crore in June.

On the other hand, the value of put options showed a different trend. The total value decreased from Rs 2,697 crore in January, to Rs 2,576 crore in March and thereafter increased to Rs 3,569 crore in June. Top five companies in terms of call options in June 2007 are RIL (Rs 2,364 crore), SBI (Rs 1,538 crore), Reliance Petroleum (Rs 1,457 crore), Tata Steel (Rs 1,111 crore) and IDBI ( Rs 1,090 crore).

Similarly in terms of value of put options, the same companies made it to the top-five list—RIL (Rs 661 crore), SBI (Rs 642 crore), Tata Steel (Rs 361 crore), Reliance Petroleum (Rs 211 crore) and IDBI ( Rs 163 crore).