Equity futures have a ‘fair-value’:
Futures Price = Cash Price [1+r (x/360)] – Dividends;
where x = days to expiration of the futures contract
You can see this in action when you plot the NIFTY index value with its futures:
Initially, x/360 is large, so futures’ trade rich to cash. As expiry approaches, futures and cash prices converge. This is the natural order of things.
You can go one step further and back out the interest rate baked into these prices:
r is usually within a tight band; roughly around where short-term rates are.
So if you ever wondered why futures are trading higher than cash, now you know!