Did you ever know that NSE BSE Arbitrage contributes to the major volume of trading in India? And this is true for other exchanges too in different countries. Well, arbitrage is so far considered as the safest trading strategy and it is 100% legal in India. You need not apply tons of indicators or chart patterns to spot an arbitrage opportunity, you simply need to look at the price of the security in NSE and BSE and execute your trades. We have tried to make this process even more simpler by creating an excel sheet which signals NSE BSE Arbitrage opportunity. Read further to understand what is arbitrage and how to execute NSE BSE Arbitrage trades.
What is NSE BSE Arbitrage?
Arbitrage is a trading strategy where one takes advantage of the difference in price of a particular security on different exchanges it is traded in. Since NSE and BSE are the two major stock exchanges of India, we would consider the price difference between these two exchanges. The basic assumption behind this strategy is the fact that price tends to converge to an identical value at the end of trading day, even when there is a significant difference in price during market hours.
How to profit from NSE BSE Arbitrage?
Let’s take an example: suppose a particular stock “X” is trading at 100 INR at NSE and 98 INR at BSE during a particular time at market hours. The 2 Rupees difference in the price signals an arbitrage opportunity. You can simply buy at 98 INR on BSE and simultaneously sell at 100 INR on NSE. Towards the end of the day, the prices would tend to equate and you would make a profit on your trades.
Suppose price at NSE is 101 and price at BSE is 100.5 later in the day. You can put a sell order on BSE making 2.5 (100.5-98) rupees profit, and you can put a buy order on NSE making 1 (100-101) rupee loss. You will end up making a net profit of 1.5 rupees in the process. Not bad, if you are trading huge quantity. And moreover, this is practically risk-free, as the loss on one order would be balanced by profit on the other order.
See the below stock (from Moneycontrol) which has huge Arbitrage opprtunity (price difference of 76 INR)
Is Arbitrage an Intraday Trading strategy?
From the example above, you must have assumed that arbitrage is an intraday trading strategy. But there is a catch here, as per SEBI regulations you are not allowed to buy and sell the same stock in different exchanges on the same day. Then how would you execute your arbitrage trades?
There is a workaround; you can actually do arbitrage for stocks that you have in your demat account. The ones for which you have taken delivery previously. If you have stock X in your DP, you can sell the same in BSE and buy them in NSE as well to make a profit but then you are not doing intraday trading and so you may be paying the brokerage of delivery to your broker.
These rules are specific to Indian stock market but may vary in other exchanges.
NSE BSE Arbitrage Excel Sheet: Live Signals
The below embedded Google sheet will signal live arbitrage opportunities for NSE-BSE. All the stocks common to both exchanges are included in this excel sheet. The stocks where price difference between NSE and BSE is more than 2% qualifies for arbitrage. Check the signal column to initiate the trade.
Also Read: Pair Trading Excel Sheet: with Backtesting
How to perform Arbitrage Trade
Step 1: Refresh this page during market hours to see the stocks which have Arbitrage opportunity.
Step 2: Place order based on the “Signal” column.
Step 3: Select the stocks which you are familiar with and which you already have in your DP. The ones listed in Sensex, Nifty or F&O are better choices over others.
Step 4: Towards the end of market hours close all your open positions.