Introduction to Gift Nifty: A Cross-border Initiative

If you’re a trader who follows news about stocks, economic developments, and other factors that could affect the volatility of the Indian stock market. In that case, you’ve probably heard of the Gift Nifty, formerly known as the SGX Nifty, and you probably check it before Indian markets open. But you may be wondering why Gift Nifty is called that.
Therefore, we will explain in today’s blog why the SGX Nifty was renamed Gift Nifty.

Capital Market

The capital market is a place where financial instruments with long-term maturity are bought and sold. It provides a place where business houses and the government raise funds for different purposes.
The capital market is divided into 2 parts

1.  Primary Market – The place where securities are issued for the first time to the investors.

2.  Secondary Market – The place where the investors buy and sell issued securities.

Types of Secondary Market

1.  Cash Market – It is a place where investors get the delivery of shares after purchasing them.

2.  Derivative Market – The contract is traded in this market, and its value is derived from an underlying asset. A fixed and predetermined date is set for a derivative contract.

Stock Market Index

A stock market index shows how a certain set of stocks has performed. An index is made up of stocks that represent a specific industry or pool of securities. Utilizing the free float market capitalization weighting approach, the index is calculated. 

A few examples of indices are the Bank Nifty, which consists of stocks from the banking industry, and the Nifty IT, which consists of stocks from the technology sector. 

Did You Know?

Free float shares refer to publicly traded shares and are less than the total number of shares issued.

Nifty

The National Stock Exchange (NSE) launched the Indian market index, known as Nifty50, in 1996. Based on market capitalization, it shows the performance of the top 50 listed Indian firms. An investor can use this index to comprehend the overall market trend, which aids in the development of their trading strategy. 

SGX Nifty

Singapore Nifty is another name for SGX Nifty. It was formerly traded in Singapore dollars. Based on SGX Nifty patterns, it helps Indian traders forecast market direction. Foreign investors trade in the derivative contract, giving them access to Indian markets and enabling them to trade the Indian stock market at their local time. Trading in the SGX Nifty usually takes place ahead of Indian market hours, allowing investors to respond to worldwide sentiments that may impact Indian markets. 

Did you know? 

Gift Nifty has been traded on the Gift City, Gujarat, India-based NSE International Exchange since July 2023. It was traded on the Singapore Stock Exchange before this.

Gift Nifty

Effective July 3, 2023, the SGX Nifty contract has been rebranded as Gift Nifty. About 7.5 billion dollars worth of derivative contracts were transferred from the Singapore Exchange to the NSE International Exchange, which is based in Gandhinagar, Gujarat’s Gift City.

Gift Nifty 50, Gift Nifty Bank, Gift Nifty Financial Services, and Gift Nifty IT derivative contracts are the four products that fall under the umbrella of the Gift Nifty.

Timing of Gift Nifty

Nearly 21 hours a day are spent trading on the Gift Nifty. It has two sessions for trading timing. The hours of the first session are 6:30 a.m. to 3:40 p.m. and the second session is 4:35 p.m. to 2:45 a.m. Trade sessions for Asia, Europe, and the United States occur simultaneously with Gift Nifty trading. 

Gift City

Gujarat International Finance Tec-city, sometimes called Gift City, is an International Financial Service Center (IFSC) that was founded to establish a financial hub by providing top-notch infrastructure. It was founded by the Gujarat government, with backing from the Indian government, and it started operations in April 2015 after being granted permission by the Reserve Bank of India to function as an IFSC.

IFSCs operate in London, Singapore, Hong Kong, Dubai, and Frankfurt.

Read Also: NIFTY Next 50 – Meaning, Types & Features

Significance of Shifting of SGX Nifty to Gift Nifty

According to the CEO of NSE, India is seeing a “watershed moment” with this trend. According to him, the rebranding will enhance India’s reputation abroad, leading to the purchase of foreign contracts that were previously transacted outside the nation. The financial sector in India has achieved a significant milestone as a result of SGX Nifty’s activity since traders now have wider access to the market and more liquidity. Other foreign organizations will be able to establish themselves in the city as a result of this change.

How does Gift Nifty impact the Indian Market?

The Gift Nifty is a leading indicator of how the Indian stock market will open because the Gift Nifty opens 2.5 hours ahead of the Indian market. The movement of the Gift Nifty helps traders decide whether to enter the market with a long position or short position. When comparing Gift Nifty to Nifty 50, it is more volatile.  

If investors are uncertain about the direction of the market, they may employ Gift Nifty as a tactic to hedge their position and lower potential risk in the Indian market. Any developments in the world economy that take place after the Indian market closes and before it reopens the next day would affect the price of Gift Nifty.  

Difference between Gift Nifty and Nifty

1.  While the Gift Nifty is a futures contract based on Nifty, the Indian Nifty is made up of 50 shares. 

2.  While Indian retail investors are not allowed to trade in Gift Nifty, they can easily trade in Nifty.

3.  Global market sentiments have a significant impact on Gift Nifty, but Indian economic conditions, policies, and corporate profits have a greater impact on Nifty’s movement. 

4.  Nifty trades in real-time, while Gift Nifty only gives the Indian market’s direction.

5.  While Gift Nifty investments are made in dollars through NSE IX, investments on Indian markets can be made in Indian rupees.

6.  The Indian market is open for trading from 9:15 to 3:30, but Gift Nifty is open for trading from 6:30 a.m. to 3:40 p.m. and from 4:35 p.m. to 2:45 a.m.

Read Also: Gift City Case Study: Timeline, Management, and Development

Conclusion

The move of the SGX Nifty from Singapore to Gift City, India, is a significant milestone. It gives any outside investor a chance to enter the Indian market. Since only foreign investors or non-resident Indians can invest in Gift Nifty, Indian investors are limited in learning how the market will go.

You must also consider your risk tolerance if you are investing in the Indian market and witnessing directional momentum from Gift Nifty.

Frequently Asked Questions (FAQs)