The SGX Nifty, also known as the Singapore Nifty, is a futures contract traded on the Singapore Exchange (SGX). It tracks the performance of the Nifty 50 index, a benchmark index of the National Stock Exchange of India (NSE). This guide delves into the intricacies of the SGX Nifty, exploring its key features, functionalities, and impact on the Indian market.
What is the SGX Nifty?
The SGX Nifty is a futures contract that allows investors to speculate on the future price of the Nifty 50 index. It is a derivative instrument, meaning its value is derived from the underlying asset, the Nifty 50 index. Unlike the Nifty 50 index, which is a cash-settled index, the SGX Nifty is a futures contract, meaning it is settled in cash at a predetermined future date.
Key Features of the SGX Nifty
- Traded on the SGX: The SGX Nifty is traded on the Singapore Exchange, a leading global exchange with extended trading hours.
- Futures Contract: It is a futures contract, allowing investors to speculate on the future price of the Nifty 50 index.
- Cash Settlement: The contract is settled in cash at a predetermined future date, based on the difference between the contract price and the underlying Nifty 50 index price.
- Traded in Singapore Dollars: The SGX Nifty is traded in Singapore dollars (SGD), but it is closely correlated to the Nifty 50 index, which is traded in Indian rupees (INR).
- Highly Liquid: The SGX Nifty is a highly liquid contract, attracting significant trading volume due to its global accessibility and extended trading hours.
How Does the SGX Nifty Work?
The SGX Nifty works by allowing investors to buy or sell contracts that represent the future price of the Nifty 50 index. Investors can take a long position (buy) if they believe the Nifty 50 index will rise in value or a short position (sell) if they believe it will fall. The profit or loss on the contract is determined by the difference between the contract price and the underlying Nifty 50 index price at the settlement date.
Advantages of Trading SGX Nifty
- Global Accessibility: The SGX Nifty is traded on the SGX, a global exchange accessible to investors worldwide.
- Extended Trading Hours: The SGX Nifty offers extended trading hours compared to the NSE, allowing investors to react to global market events and news.
- Hedging Tool: The SGX Nifty can be used as a hedging tool for investors with exposure to the Indian stock market.
- Speculation Opportunity: The SGX Nifty provides an opportunity for investors to speculate on the future direction of the Nifty 50 index.
- Liquidity: The SGX Nifty is a highly liquid contract, ensuring efficient execution of trades.
Disadvantages of Trading SGX Nifty
- Currency Risk: The SGX Nifty is traded in SGD, exposing investors to currency risk.
- Volatility: The SGX Nifty can be more volatile than the underlying Nifty 50 index due to its futures nature.
- Margin Requirements: Trading SGX Nifty requires margin deposits, which can increase the potential for losses.
- Limited Access for Indian Residents: Indian residents are prohibited from directly trading SGX Nifty contracts.
Impact of SGX Nifty on the Indian Market
The SGX Nifty plays a significant role in influencing the Indian stock market. As a leading indicator of the Nifty 50 index, the SGX Nifty provides insights into investor sentiment and expectations for the Indian market. Additionally, the SGX Nifty can act as a liquidity provider for the Nifty 50 index, attracting foreign capital and enhancing market efficiency.
The SGX Nifty is a valuable tool for investors seeking exposure to the Indian stock market. Its unique features, including global accessibility, extended trading hours and liquidity make it an attractive investment option. However, investors should carefully consider the potential risks associated with trading SGX Nifty, such as currency risk, volatility, and margin requirements. Understanding the intricacies of the SGX Nifty and its impact on the Indian market is crucial for making informed investment decisions.
How is SGX Nifty different from Indian Nifty?
The primary distinction between the Indian Nifty and the SGX Nifty is that the latter exclusively trades on the National Stock Exchange, or NSE, an Indian stock exchange platform, while the former is a futures trading platform in Singapore where stock prices are predetermined to minimize future risk.
The contract size between the SGX Nifty and the Indian Nifty is another significant distinction. In contrast to the SGX Nifty, where a minimum of 75 shares are required, an Indian Nifty contract requires a minimum of 75 shares. This indicates that while every Indian nifty must contain shares, the SGX nifty does not have a contract with shares.
Since it is the only trading platform that operates sixteen hours a day in Singapore and the most active trading platform there, SGX Nifty sees a high volume of users and trading activity. With the Indian Nifty, a national exchange platform, this is unquestionably not the case. These characteristics of SGX nifty make it more profitable.
How does SGX Nifty impact the Indian Market?
As we’ve already covered, the SGX Nifty is useful for observing and forecasting the behavior of the Indian Nifty. The SGX Nifty and the Indian Nifty open at different times; the Singapore market opens approximately 2.5 hours ahead of the Indian market. This makes it possible for investors to monitor the SGX nifty in order to stay informed about market movements and to see how trading is proceeding overall. Investors can learn about the Indian market and whether it will open with favorable or unfavorable outcomes by watching this. Consequently, investors who are hesitant to enter the Indian market can put their money into SGX and monitor the SGX nifty to gain insight into the Indian nifty and stock exchange platform beforehand.
While assessing the Indian market and calculating your chances may be easier with this method, the accuracy of the results these investors receive varies depending on the different economic conditions in both countries. Due to their radically different economic systems, Singapore and India both have distinct but significant effects on market behavior.
Since they influence each other’s behavior in certain ways, the SGX Nifty and the Indian Nifty are equally significant and cannot be discussed without bringing up the other. To become an expert trader in the stock market, one must first understand the meaning of terms like Nifty and SGX Nifty, as well as numerous other financial terms that are frequently used and have significant implications for the stock market.
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FAQ
What is the difference between SGX Nifty and Nifty?
Does SGX Nifty affect Indian market?
What does the Nifty stand for?
What is the name of Singapore Nifty?
What is the difference between SGX nifty and nifty in India?
1. SGX nifty is Nifty futures contract trading in Singapore Stock Exchange and in India, Nifty contract trades on NSE. 2. The contract size of SGX Nifty is different compared to Nifty. In India, we have 75 shares in every Nifty contract Lot whereas the SGX nifty does not have a contract with shares in it.
What is SGX Nifty?
SGX Nifty is a derivative of the National Stock Exchange’s Nifty index and trades officially on Singapore Stock Exchange (SGX). SGX Nifty thus moves with respect to Nifty50. The index opens at 8:00 AM Singapore t
Does SGX Nifty trade in Singapore?
Instead of Singapore Exchange, US dollar-denominated contracts of Nifty futures will now trade in NSE IX which is in GIFT City SEZ and works under the regulatory framework of the International Financial Services Center Authority (IFSCA). What happens to SGX Nifty?
Is SGX Nifty rebranded as gift Nifty?
However, starting 3rd July 2023, SGX Nifty is rebranded as GIFT Nifty and will be traded on NSE International Exchange (NSE IX). The USD 7.5 billion worth of derivative contracts which were traded in Singapore earlier, will shift to India. And SGX Nifty will be delisted from the Singapore Exchange. Who Can Trade on SGX Nifty?