Home / Business and Economy / IT Stock Futures Discount Fuels Trader Profits
IT Stock Futures Discount Fuels Trader Profits
18 Jul
Summary
- Traders exploit IT stock price anomalies for single-digit gains.
- NSE's SLBM enables borrowing and selling of IT shares.
- Futures contracts trade at a discount to underlying IT stocks.
Proprietary traders are currently exploiting a pricing anomaly within India's major IT stocks, including Wipro, HCL Technologies, Infosys, and Tata Consultancy Services. This strategy involves selling borrowed shares from the stock lending and borrowing mechanism (SLBM) and simultaneously purchasing futures contracts that are trading at a discount to their underlying value.
The opportunity arises because futures contracts for these IT stocks have slipped into a discount compared to their spot prices. This is largely attributed to a sector underperformance over the past 15 months and a shift in investment towards overseas AI-related firms. Traders are borrowing IT stocks through the SLBM, selling them in the cash market, and buying the discounted futures.
As spot and futures prices converge at expiry, the traders close their positions by taking delivery through the futures contract and returning the borrowed shares. This process allows them to pocket the difference, after accounting for costs like lending fees and transaction taxes. For example, Wipro futures offered an annualized return of 20% based on a price difference in late July 2026.
This reverse arbitrage has proven profitable, with the returns generated by HCLTech and Wipro exceeding the Nifty's returns. Market experts anticipate this trend to persist for major IT counters in the coming quarters due to global AI trade influences.
