The SGX Nifty, or Singapore Exchange Nifty, is a derivative product traded on the Singapore Exchange (SGX). It is based on the Nifty 50 index, which represents the performance of the top 50 companies listed on India’s National Stock Exchange (NSE). The SGX Nifty allows international investors to gain exposure to Indian equity markets without directly trading on the NSE. Over time, it has become an important indicator for predicting the opening trends of Indian stock markets.
Meaning and Overview
The SGX Nifty is a futures contract denominated in US dollars and linked to the Nifty 50 index. It enables traders and investors from outside India to speculate or hedge their positions based on movements in the Indian market. Because the Singapore Exchange operates in a different time zone, trading in SGX Nifty begins earlier than the Indian markets, providing a preview of the expected market sentiment for the day.
Key Features of SGX Nifty
-
Underlying Asset: The contract is based on the Nifty 50 index of India.
-
Currency Denomination: It is traded in US dollars, unlike the NSE Nifty, which is traded in Indian rupees.
-
Market Accessibility: It allows foreign investors and institutions who may not have direct access to the Indian markets to trade Indian equity derivatives.
-
Trading Hours: SGX Nifty trades nearly 16 hours a day, starting early in the morning (around 6:30 AM IST), well before Indian markets open.
-
Settlement: The settlement of SGX Nifty contracts is cash-settled based on the closing value of the Nifty 50 index on the expiry day.
Significance of SGX Nifty
-
Indicator for Indian Markets: SGX Nifty acts as a barometer for predicting the likely direction of the Indian stock market. If SGX Nifty futures are trading higher before market opening, it indicates a positive start, and vice versa.
-
Global Participation: It provides international investors an avenue to participate in Indian equity markets without the regulatory or currency barriers of direct investment.
-
Hedging Tool: Institutional investors use SGX Nifty to hedge their portfolios against market volatility.
-
Liquidity and Flexibility: Its extended trading hours provide greater liquidity and flexibility to react to global events affecting Indian markets.
-
Market Integration: SGX Nifty represents the globalization of financial markets, linking Indian market sentiment with global investors.
Recent Developments
In recent years, the NSE and SGX have collaborated to bring trading of Nifty derivatives to GIFT City (Gujarat International Finance Tec-City) under the NSE IFSC-SGX Connect program. This initiative has led to the creation of GIFT Nifty, which replaces SGX Nifty. All trading activity is now conducted through GIFT Nifty at the NSE International Exchange (NSE IX) in GIFT City, consolidating offshore Nifty trading in India’s own international financial center.
Conclusion
The SGX Nifty has played a crucial role in connecting Indian and global markets, offering insights into market sentiment, and facilitating international participation in India’s growth story. With the migration to GIFT City, it continues to evolve, reflecting the growing significance of India in the global financial landscape.
