My normal understanding of how an index gets it value is based on the weightage of its stocks. However some indices like SGX Nifty or Dow Jones Futures etc do trade after the markets close. In such a scenario is there any way to appropriate the difference of prev day closing price with the current days opening price for index constituents when market opens. In this case index value is something which is not derived from the prices of its constituents. So how do the prices of individual components get adjusted? Or is it just index gets recalculated afresh post next days opening? Any idea please?
Index is like official ticket, futures is like black ticket, can be trading in premium or discount depending on various factors.
Index depend on underlying stocks but futures are speculative contracts doesn’t necessarily need to depend on spot every time.
When markets are closed Index Futures are driven by speculation and sentiment.
The next day, exchange holds pre-market session before market opens, during this time most of this sentiment is seen driving movement in underlying stocks and hence the Index as well, that is how both Index and it’s Futures prices get aligned again.
Thanks a lot
Dow jones is down .but. sgx nifty is up . What should i understand about market tomorrow?
Dow Jones future was down by around 70 points when Indian markets were open, so that negative value is already accounted in Nifty 50, in that way Dow Jones is up by few points, and that might be one of the reason why SGX Nifty is up.