Beginner question about future arbitrage

#1
Hey,

I have some questions about the cash-future arbitrage opportunity that exists in Indian stocks. How is the spread between a stock's price and it's monthly future prices not arbitraged away yet? It can give you a (almost riskless) 10% return pa on certain stocks.
I am a foreign investor, so if I can convert Euros to Rupees i am exposed to currency risks. But on a historical basis, the rupee hasn't devalued as much as the possible profits. Is it possible to get this kind of return in practice? Or am I missing some risks and practical limits? With interest rates at record lows in Europe and the US, one would expect this opportunity would not be here.

Thank you for helping me!

Mpi
 
Last edited:

cinderblock

Well-Known Member
#3
You can also get ~10% by investing in FD - riskfree. You don't need arbitrage at all.

Usually, the average futures premium will be the same as average interest rates in the system. So in EU, US and Japan the futures premium will be less than in emerging markets because the interest rates are low.
 

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