Nifty Future & Cash Nifty Relation

#1
I request Seniors for guide on the effect of following on further movement of market
1. Futures Nifty closes at a premium to Nifty of Cash market.
2. Futures Nifty closes at a discount to Nifty of Cash market.
3. Day to day increase or decrease of Premium / discount


Regards,

Suhas Joshi
 

vince

Active Member
#2
Suhas,

The fundamentals are akin to any market. if there are more sellers than buyers the cheaper the product hence the discount and vice versa for premium.

However it does not follow that the majority is right.
 
#3
The Nifty futures should theoretically be priced higher than the Nifty index. If the premium is lower than it should be, or if the futures are priced lower than the Nifty index, it could be attributed to hedging, heavy speculation, or it could just be the effect of dividends. Anyway, one shouldnt read too much into it.
Your third point is the much more interesting one. Increases/ decreases in the premium/ discount should be viewed in conjunction with the increase/ decrease in Open Interest and that will tell you quite a lot.
 
#4
The Nifty futures should theoretically be priced higher than the Nifty index. ..............
Your third point is the much more interesting one. Increases/ decreases in the premium/ discount should be viewed in conjunction with the increase/ decrease in Open Interest and that will tell you quite a lot.

Hi,
Can you explain the 3rd point in detail?
Thanks and Regards,
RMN
 

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