Trading scenario of Cash Buying v/s Index selling?

If index heavy stocks are rising but index is falling, then it means people are buying index heavy stocks but shorting futures.

Whats likely to happen after that ?

  1. Stocks will follow index and hence stocks will fall OR

  2. Index will follow stocks and hence index will rise OR

  3. Both are equal probable scenarios


If index heavy stocks are going up and if the index still falls, then the other index stocks are correcting and pulling the index down. Index futures is an expectation of where the market participants expect the index to be at expiry at every point in time. If the Index futures are at a discount to the Index, then the market expects the Index to fall.

A fall in the index value generally pulls stocks down, this could also depend on the extent of the Index fall and also on the way the stock is poised for the day.

If a company announces good results or is favoured by a goverment policy being passed etc and if there is buying occuring in this counter, then unless there is a major market sell-off, a slight fall in index will not affect the stock.

On the other hand, stocks that are over-bought will lose strength and stocks that are weak for the day will get weaker if the index falls.