6 February 2021

Stock index futures in India

By DICC Institute

In the financial market stock index are some crucial form of crystal balls. They can even be termed as the pure techniques to settle down the cash based on the futures contract of the stock market. There are many traders out there who are interested in this information as that can something through which they make money out for a living. The stock index also keeps on changing from time to time. The stock index can be used as a strong indicator in deciding important market sentiments. There are many people out there which usually trade in stocks future as well as in index futures such as speculators most likely as positional traders, day traders, swing traders and even the hedgers. As per many users, the base of any kind of stock or any kind of index prediction is based on the action of the price and the volume generated through the stock or the index. A lot of people between us is already familiar with the term future contract. For those who don’t know it’s a kind of agreement that is used for selling and buying the value of the particular underlying asset. This is done for a specific price and a specific date for the upcoming future.

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We all knew the fact the future instruments can drive the particular value as per the underlying falls. The future price change accordingly with that. It is not an easy task to understand the future of stocks or indexes this requires the proper understanding of open interest along with the price of the data. The market can be either topped or bottomed and with this, these data are changing. The use of open interest can provide an accurate picture of all kind of trading and the activities associated with it such as the derivative segment.

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The future of this whole market is quite unpredicted. The future investment drives its investment in the underlying move in the sync. The price also falls so is it obvious that future price may also come down to the very extent. The risk is potentially a lot that most of us are already aware of. When we talk about a trader that he can gather a lot of cues from an open interest (IO) level via a spot to identify potential trends going on in the stock market. If any rise is being noticed in the open interest than it can be something precisely associated or I can link with the rising price signal kind of thing that indicates that additional money is going in the market soon. This has merely become a regular trend in the stock market in recent few years.

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Many of the time when the price is continuously rising in the market then the market remains a kind of steady or almost reaches to the very top. While if there is not much rise in the open interest also in some quite sharp time it indicates here that the trend transversal has reached to its bottom line which is not a great news a lot of time. When there a small amount of open interest or in most prĂ©cised way said no open interest at all then this means there is no open position at all or all the available positions are closed at that particular time. High open interest also opens many options of contracts. The market participants are going to closely see the market for some point of time that’s clear. The lead indicator here is an open interest that is the trend in the market nowadays. One more parameter that is quite interesting to note is also easily available is known as the basis gap. This is mainly defined as the difference between the future and spot prices. So, if termed generally if there is no action regarding the corporation then the basis gap of the stock market is considered positive.

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As per the thumb rule followed in the stock market, the basis gap indicates the bullishness when we talk about the stock. The negative basis gap is however considered as the bearishness in the stocks. The stock is many times tracked using the basis gap by many traders out there. Apart from all this, the basis gap can be further split into the information on what is the cost of carrying, which may include all the factors like risk-free interest rate and also the time of expiry that is been calculated each time. The cost is high when there is corporation action on the stack. Many times if there is no need of any kind of event this mainly indicates that the stock is having a quite high cost that is been carried and indicating a good strong hand people are anticipating in the stock market with their fine moves which are quite an in completion that which person is going to get what of the market and in what price.    


The stock market is quite a un predictive field but the more knowledge you gather the nicer player you are going to be. I hope the articles were helpful to all my readers out there.

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