Difference in Nifty Spot and Futures price

I note 30 point difference between spot nifty and nifty future, why this? can we use this difference in our trade,if yes! how?

Normally Futures = Spot + Cost of carry

Cost of Carry - is the relationship between futures prices and spot prices. It measures the storage cost (in commodity markets) plus the interest that is paid to finance or ‘carry’ the asset till delivery less the income earned on the asset during the holding period. For equity derivatives, carrying cost is the interest paid to finance the purchase less (minus) dividend earned. For example, assume the share of ABC Ltd is trading at Rs. 100 in the cash market. A person wishes to buy the share, but does not have money. In that case he would have to borrow Rs. 100 at the rate of, say, 6% per annum. Suppose that he holds this share for one year and in that year he expects the company to give 200% dividend on its face value of Rs. 1 i.e. dividend of Rs. 2. Thus his net cost of carry = Interest paid – dividend received = 6 – 2 = Rs. 4. Therefore, break even futures price for him should be Rs.104. It is important to note that cost of carry will be different for different participants.

Ref - NISM Series VII Module

If you think that there is a mismatch i.e if you think the cost of carry is less than 30 points, then you can short futures and buy nifty spot (buy buying a portfolio of all stocks that comprise Nifty in the same ratio) This way you'll make a riskless profit. However the chances of finding such opportunities are very very low if not zero. This is called an Arbitrage Trade

@Sameer Bhagat, beautifully explained. But, I have a query, can we buy Nifty Spot? If my understanding is correct I don’t think so, please clarify. Thanks.

I heard Nifty spot can be bought with some software issued by NSE.
My assumption is if I need to buy the Nifty Spot, I should call zerodha, so that they could use such software and buy Nifty spot is exact proportions.

Don’t think we can trade spot index directly. As far as i know, it is not possible anywhere in the trading world. The closese thing would be to trade ETF’s like Niftybees :slight_smile:

Yeah, I think you are right.
NSE used to have such software or plugin which they discontined it seems.
I have mentioned that because in many study materials they talk about buying spot nifty (ofcourse not directly, no one could do that, in the world, because buying an index is not possible) by buying constituent stocks in the same proportion by rounding off the number of shares and buying in rapid succession by market order (using NSE NEAT software plugin, in a single keystroke).
Thants what they talk about and also this information is present in old NCFM modules.
I am not aware of the recent modules.
Example: check this link http://www.karvy.com/articles/arbitrage.htm