Understanding SGX Nifty: Definition and its working process

The stock market is a dynamic and ever-changing landscape, with traders and investors continuously looking for indicators that provide insights into market trends. One such critical indicator is the Gift Nifty (also known as SGX Nifty). If you are an investor or trader in India, understanding SGX Nifty can give you an edge in predicting the movement of the Indian stock market before it opens. Let us understand what SGX Nifty investing is, how Singapore Nifty is different from Indian Nifty, and what are the advantages and disadvantages of Gifty Nifty.

• Table of contents

• What is SGX Nifty?
• How is SGX Nifty different from Indian Nifty?
• How does SGX Nifty impact the Indian market?
• Advantages of SGX Nifty
• Disadvantages of trading in SGX Nifty

What is SGX Nifty?

SGX Nifty was a derivative contract based on the Nifty 50 index that used to be traded on the Singapore Exchange (SGX). It was sometimes wrongly referred to as SGX Bank Nifty. SGX Nifty Futures represented the futures contracts of the Nifty 50, the benchmark stock index that comprises the 50 largest companies listed on the National Stock Exchange (NSE) of India. Traders bought or sold contracts based on the expected future value of the Nifty 50 index. However, SGX Nifty has now been renamed Gift Nifty and is traded on the NSE International Exchange for a span of 16 hours.

How is SGX Nifty different from Indian Nifty?

SGX Nifty and Indian Nifty differ in these ways:

• Trading platform: SGX Nifty index is traded on the NSE International Exchange and is accessible to global investors, whereas Indian Nifty is traded on the National Stock Exchange (NSE) in India. SGX Nifty 50 Futures enables global investors to participate in the Indian stock market.
• Trading hours: Singapore Nifty, aka Gift Nifty, operates in 2 sessions for a total of 16 hours from 6:30 am to 3:40 pm and 4:35 pm to 2:45 am. It provides early market indications. Indian Nifty follows the limited trading hours of NSE from 9:15 am to 3:30 pm IST.
• Pool of investors: SGX Nifty, sometimes also known as Singapore Nifty 50, serves as a derivative instrument for global investors, whereas Indian Nifty represents the actual Indian stock market index comprising 50 blue-chip companies.

How does SGX Nifty impact the Indian market?

Gift Nifty impacts the Indian market by acting as an early indicator of market trends, reflecting global investor sentiment, and providing a glimpse of the Nifty 50 index's performance before Indian markets open. As a futures contract traded on the NSE International Exchange, it helps international investors hedge risks and make investment decisions related to Indian stocks. A significant movement in SGX Nifty India often sets the tone for the opening of the Indian stock market, influencing investor behaviour and market volatility.

Advantages of SGX Nifty

• 16-hour trading access: SGX Nifty provides investors to trade beyond the official Indian market hours. It operates for 16 hours as compared to just 6+ trading hours of NSE and BSE. Gift Nifty provides a platform for investors to speculate on the future performance of the Indian market.
• Risk hedging and volatility management: SGX Nifty offers early signals for Nifty 50 movements. Investors can manage market risks by anticipating market fluctuations. The SGX market allows investors to react to global events before the Indian market opens.
• Higher liquidity: Due to its longer-than-traditional trading hours, Nifty SGX investing provides higher liquidity to traders.

Disadvantages of trading in SGX Nifty

• Speculative trading risks: SGX Nifty investing encourages short-term speculation. It is also heavily influenced by global market trends.
• High volatility: Gift Nifty can cause sharp fluctuations affecting Indian markets.
• May cause confusion: Since SGX investing takes place over the course of 16 hours per day as compared to 6 hours on the BSE and NSE, it may create confusion for investors.

In conclusion, SGX Nifty is an essential indicator for investors and traders in the Indian stock market and a platform for global investors to invest indirectly in the Indian stock market. SGX Nifty index provides insights into how the Nifty 50 index may perform based on global economic trends and overnight developments. Understanding Gift Nifty can help investors make informed decisions and manage their market strategies more effectively.

FAQs:

What is the purpose of SGX Nifty?

SGX Nifty serves as an early indicator for the Indian stock market, offering global investors a platform to trade Nifty 50 futures, reflecting market trends, sentiment, and potential price movements.

Why was SGX Nifty renamed GIFT Nifty?

SGX Nifty was renamed GIFT Nifty to reflect its transition to India's GIFT City (Gujarat International Finance Tec-City). Gift Nifty is now traded on the NSE International Exchange.

Which global market affects the Indian market?

Global markets like the US, China, and European markets significantly affect the Indian market due to their economic influence, trade relations, and investor sentiment, impacting stock prices and currencies.

Does SGX Nifty affect the Indian market?

Yes, GIFT Nifty affects the Indian market by providing early signals of market sentiment, influencing investor behaviour and stock price movements in India, especially before the Indian market officially opens for the day.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.