What is SGX Nifty?

SGX Nifty is the Nifty index traded on the Singapore Exchange, allowing foreign investors to invest in the Indian market through a popular derivative product.
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What is SGX Nifty?
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3 mins read
17-January-2025

Key takeaways

  • SGX Nifty is a futures contract that is traded on the Singapore Exchange (SGX).
  • SGX Nifty is traded in Singapore dollars, but it is closely correlated to the Nifty index, which is traded in Indian rupees.
  • This makes SGX Nifty a popular instrument for investors who want to trade the Indian stock market without having to physically go to India.

What is SGX Nifty?

SGX Nifty, or Singapore Exchange Nifty, is a popular derivative of India’s CNX Nifty, traded on the Singapore Stock Exchange (SGX). It allows foreign investors, including FIIs, to invest in the performance of the Indian stock market without directly trading in India. While Indian stocks aren’t available on SGX, futures products like SGX Nifty Futures enable investment in Nifty Futures. As an offshore instrument, SGX Nifty offers global investors a way to access the Indian market through futures trading based on the NSE Nifty index.

What is the SGX Nifty opening time?

SGX Nifty, which tracks the NSE Index, is settled based on the closing price of the S&P CNX Nifty in India. It offers two types of contracts with different settlement periods and trading timings:

E – SGX QUEST (T) Settlement: Same-day settlement, trading from 9:00 AM to 6:15 PM Singapore time (6:30 AM to 3:45 PM IST), Monday to Friday.

E – SGX QUEST (T+1) Settlement*: Next-day settlement, trading from 7:15 PM to 1:00 AM Singapore time (4:45 PM to 10:30 PM IST), Monday to Friday.

These flexible timings enable global traders to access SGX Nifty even after Indian markets close, as Singapore is 2.5 hours ahead of India. With trading hours from 6:30 AM to 11:30 PM IST, SGX Nifty offers a longer window than Indian markets, providing increased liquidity and enhanced price discovery. Traded in Singapore Dollars (SGD), SGX Nifty also allows investors to hedge against foreign currency risk while investing in Indian equity futures.

How does SGX Nifty work?

The Singapore Stock Exchange Nifty (SGX Nifty) is a derivative contract that tracks the performance of the Nifty 50 index, a benchmark stock market index in India. The SGX Nifty market opens approximately two hours before the NSE (National Stock Exchange of India) market. Due to the high correlation between the two markets, the movement of the SGX Nifty can be used as an indicator for the opening direction of the Indian stock market. This time difference allows Indian financial institutions and advisory services to analyze the SGX Nifty and provide pre-market trading recommendations for the Nifty 50. Additionally, the geographical proximity of India and Singapore further strengthens the interconnectedness of these markets, as investor sentiment often transcends geographical borders and influences market movements in both countries.

SGX Nifty futures

The Singapore Nifty is a futures contract derived from India's National Stock Exchange (NSE) Nifty 50 index. This derivative instrument facilitates global investors in hedging their exposure to Indian equities, engaging in speculative trading, and participating in the Indian stock market even outside of NSE's trading hours. Consequently, the SGX Nifty presents a compelling avenue for international traders seeking to invest in the Indian equity market without the necessity of registering with Indian regulatory authorities.

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How is SGX Nifty different from Indian Nifty?

Let us explore some key differences between SGX Nifty and Indian Nifty:

Aspect

SGX Nifty

Indian Nifty

Trading Exchange

Singapore Stock Exchange

National Stock Exchange (NSE)

Nature

Futures contract based on Nifty

Benchmark index of top 50 Indian companies

Trading Hours

6:30 AM to 11:30 PM IST

9:15 AM to 3:30 PM IST

Denomination

Singapore Dollars (SGD)

Indian Rupees (INR)

Influencing Factors

Global market sentiment

Indian economy, policies, earnings

Market Information

Provides a future direction

Real-time market movements


How does SGX Nifty impact the Indian market?

Explore how does SGX Nifty impact the Indian market:

1. Time difference and early indication:

  • The time difference between the opening of the Singapore market and the Indian market provides a valuable early indication of market sentiment. Singapore markets open about two and a half hours before the Indian market.
  • Investors and traders use the SGX Nifty as a leading indicator to gauge the potential direction of the Indian market when it opens. Fluctuations in the SGX Nifty can provide insights into how the Indian Nifty might behave later in the day.

2. Pre-market trading and reaction to global cues:

  • SGX Nifty allows for pre-market trading, providing an avenue for investors to react to global cues and news that may impact the Indian market.
  • As global events and economic factors affect financial markets worldwide, including India, the SGX Nifty can reflect how international developments may influence investor sentiment in the Indian market.

3. Risk management and hedging:

  • Investors, especially those skeptical about the Indian market, may use SGX Nifty as a tool for risk management and hedging strategies. They can take positions in the SGX Nifty to offset potential risks in the Indian market.
  • It provides a way for investors to participate in the Nifty movement without directly engaging in the Indian market, offering a level of flexibility and risk mitigation.

4. Global economic structure differences:

  • The reference content rightly points out that India and Singapore have different economic structures. Economic events and policies in both countries can impact their respective markets differently.
  • Investors need to consider the broader economic factors in both nations when interpreting SGX Nifty movements and making decisions based on them.

5. Interconnected behaviour of Nifty and SGX Nifty:

  • The behaviour of the Indian Nifty and SGX Nifty is interconnected. Movements in one market can influence the other, creating a symbiotic relationship between the two.

Traders and investors cannot overlook either market when analysing market behaviour and making investment decisions.

Impact and trading hours

The Singapore Exchange (SGX) operates for 21 hours daily, from 6:30 AM to 3:40 PM and 4:35 PM to 2:45 AM, facilitating significant overlap with trading hours in Europe, Asia, and the Americas. This extended market exposure can influence global economic cycles. The SGX platform provides valuable trading information and enables investors to effectively plan hedging strategies.

Trading procedures

Contracts on the SGX are available in two durations: monthly and quarterly. The final trading day occurs two business days after the delivery date, excluding non-trading days. The exchange's 21-hour operating window empowers investors to implement efficient trading and hedging strategies aligned with their investment objectives and risk tolerance.

Advantages of SGX Nifty

Global exposure: International investors who are interested in gaining exposure to the Indian stock market can do so through SGX Nifty without needing direct access to Indian exchanges. This offers a convenient way to diversify portfolios across different markets.

Risk management: SGX Nifty futures enable investors to hedge their exposure to Indian equities. By taking positions on the SGX Nifty, investors can offset potential losses from their holdings in the Indian markets, thereby reducing overall risk.

Disadvantages of SGX Nifty

Limited accuracy: While SGX Nifty movements are often used as an indicator of the Indian market's direction, it's not always a precise predictor. Factors like news developments, global sentiment, and after-hours trading can influence the opening direction of the Indian markets differently from the SGX Nifty.

Regulatory risks: Changes in regulations or trading policies in either the Indian or Singaporean markets can impact the trading of SGX Nifty. Investors need to stay informed about any regulatory changes that might affect their ability to trade these futures contracts.

Market manipulation concerns: There have been instances where discrepancies between SGX Nifty and Indian market movements have raised concerns about potential market manipulation. This can create uncertainty and affect traders' ability to make informed decisions.

It is important to note that the advantages and disadvantages of SGX Nifty can vary based on individual investors' goals, strategies, and risk tolerances. As with any financial instrument, careful research and consideration of personal circumstances are essential before engaging in trading or investing in SGX Nifty.

Conclusion

The availability of SGX Nifty provides an avenue for international investors to gain exposure to Indian equities without needing direct access to the Indian stock market. It is worth mentioning that regulatory changes and market dynamics can impact the trading of SGX Nifty, so investors should stay informed about any relevant updates.

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Frequently asked questions

What is SGX Nifty?

SGX Nifty is a Nifty index derivative, traded on the Singapore stock exchange, that assists in predicting and monitoring the performance of the Indian Nifty index. Here, SGX full form stands for Singapore Exchange.

In which currency the trades are performed in SGX Nifty?

Trades on SGX Nifty are usually done in Singapore dollars.

What is the trade time of SGX Nifty (GIFT Nifty)?

The trading hours of SGX Nifty are from 6:30 AM to 11:30 PM IST, which is longer than the trading hours of the Indian stock markets.

What is the difference between Nifty and SGX Nifty?

The Nifty 50 is a stock market index that tracks the top 50 companies in India, while SGX Nifty is a futures contract traded in Singapore that reflects the future value of the Nifty. Nifty trades on the National Stock Exchange of India, while SGX Nifty trades on the Singapore Exchange.

Can Indians trade in SGX Nifty?

Yes, Indians can trade SGX Nifty through brokers registered with the Singapore Exchange. However, currency fluctuations and regulations add complexity. It is advisable to understand the risks involved before trading.

Why does SGX Nifty affect the Indian market?

Since SGX Nifty or Singapore Nifty reflects the anticipated performance of the Nifty, its movement can influence investor sentiment in India. A rising SGX Nifty might indicate a positive opening for the Indian market, and vice versa. However, other global factors can also impact the Indian market.

How is SGX Nifty calculated?

The SGX Nifty, being a futures contract, has a derivative contract size calculated by multiplying the current price of the Nifty Index futures by a multiplier of US $2. This results in an approximate contract size of US $11,000, assuming a futures price of $5,500.

What is the new name of SGX Nifty?

GIFT Nifty is a derivative product that serves as a benchmark for the National Stock Exchange's (NSE) NIFTY 50 index. Formerly known as SGX Nifty, it was recently rebranded and transitioned to NSE IFSC, an international exchange located in GIFT City, Gandhinagar, Gujarat. The index commenced trading on September 25, 2000, under the name SGX Nifty, and subsequently resumed trading under its new identity on July 3, 2023.

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