Basis
The difference between a futures price and the spot price of its underlying.
Formula
Basis = Futures Price - Spot Price
Unit
index points
In depth
Basis reflects the cost of carry and must converge to zero at expiry, because at that moment the futures contract and the underlying are the same thing. That convergence is guaranteed by arbitrage, not by market opinion, which makes basis one of the few genuinely predictable quantities in a market. A hedge using futures is exposed to basis risk when the hedged asset is not exactly the futures' underlying — hedging a portfolio with index futures leaves the difference between the portfolio and the index unhedged. Traders sometimes read a widening basis as sentiment, which conflates a financing calculation with an opinion.
Worked example
Futures at 24,138 against spot at 24,000 gives a basis of 138 points. With 30 days to expiry that is an annualised carry of 138 / 24,000 x 365 / 30 = 7% — exactly the financing rate, and no view about direction.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Basis” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.