Explained: SGX Nifty to become GIFT Nifty from tomorrow; what it means for India

The beginning of the operation of GIFT NIFTY will be a significant step in the shifting of the base Singapore Exchange to the NSE International Exchange (NSE IX) in Gandhinagar, Gujarat.

GIFT City is the new financial hub in Gujarat, which the government intends to develop as a competitor of other global financial centres like Dubai, Mauritius, and Singapore.

The recent move is set to come into effect after the resolution of a five-year-old feud between the National Stock Exchange of India Ltd came to an end. It holds special significance for India’s trade market and Gujarat’s GIFT city.

Importance of SGX Nifty transformation into GIFT Nifty for India?

–Four products of GIFT Nifty: The umbrella brand will include a total of four products, which are GIFT Nifty 50, GIFT Nifty Bank, GIFT Nifty Financial Services and GIFT Nifty IT derivative contracts.

-Watershed moment for India: MD and CEO of NSE International Exchange, V Balasubramaniam, called the move to be a “watershed moment in the history of India,” according to an Economic Times report. He said that for the first time, India will get an international contract which was earlier exported out of India.

-Major boost to GIFT City: GIFT City has emerged as India’s first international financial centre. FEMA restrictions were removed by RBI from this zone in 2015. The transformation wil result With the shifting of derivative contracts due to SGX-Nifty tie up, Indian bourses revenue is also expected to rise in the current financial year. Nifty derivative contracts used to be a major contributor to SGX’s revenue from higher average fees and volumes.

-SGX-NIFTY’s 50-50 partnership: All the open positions in SGX Nifty are shifted to NSE IFSC Nifty as part of a liquidity switch, according to the SGX. As per the deal, SGX and NIfty will split costs and revenues “roughly 50-50″ Michael Syn, SGX’s head of equities, said in an interview. Trading of futures and options will be held in the GIFT City and SGX will take care of clearing.

-21 hour trading: At present, SGX Nifty operates for 16 hours from 6:30 am IST till 10:30 pm IST. However, GIFT Nifty’s operation time has been extended from 4 am IST to 2 am IST the following morning. After the transition on Monday, all US dollar-denominated Nifty derivatives contracts will be exclusively traded on NSE IFSC.

-GIFT Nifty to be the early indicator for markets: Earlier, SGX Nifty was seen as an early indicator for dictating the Indian market, which will change from July 3 onwards.

“I am happy to say that the Indian equity markets every day were being led by the international prices because we all wake up in the morning because Singapore Nifty opens before us and they start setting up the price market and the tone for our Indian market,” he told ET.

-Expansion of global investor reach: The NSE-SGX connect will help Indian markets to increase their reach among global investors, especially those who are not directly engaged with Indian capital markets.

“There are many initiatives that are underway to see that global markets directly engage with the Indian capital markets through the international exchanges in GIFT IFSC. For example, we are looking at the potential of sponsored and unsponsored depository receipts of Indian stock,” Injeti Srinivas, Chairman, International Financial Services Center Authority (IFSCA) told Indian Express.

Updated: 02 Jul 2023, 11:35 AM IST