Arbitrage trading is a opportunity to make profits from differences in value between the two markets of same script.It is legally allowed in india. Arbitrage is responsible for a large volumes on the NSE & BSE exchanges.
How it works/Example?
suppose wipro company trading at Rs. 500 on NSE at same time trading at Rs.500.50 on BSE exchange . In this situation you can buy share on NSE & Sell on BSE & make Rs. 0.50 profit on each share.
Practically, the prices on both exchanges should be the same at all times but Arbitrage opportunities generates when they’re not. In theory, It is a riskless activity . It is also known as “Profit risk less Trading”.
Does Arbitrage Trading is allowed for individual in india?
No, currently Arbitrage is not allowed for individuals (cant buy in NSE/BSE & sell in NSE/BSE) Only large hedge funds & institutional investors are capable of taking advantage of Arbitrage opportunities.