The Demise of the SGX Nifty

Introduction

For over two decades, by looking at the Singapore stock exchange (SGX), we could get an indication of whether the Indian market would open in the Red or Green. This trick was made possible through a derivative product called the SGX Nifty. However, recent developments have led to the discontinuation of the SGX Nifty and the introduction of a new trading avenue in India's Gujarat International Finance Technology City (GIFT City).

The Rise and Fall of SGX Nifty:

This allowed foreign investors to trade in dollars and evade capital gains taxes. It became a leading indicator for Indian stock market sentiment due to the time difference between India & Singapore.

The Spat and Annulment:

In 2018, the NSE grew dissatisfied with the popularity of the SGX Nifty, Meanwhile, India was building GIFT City to establish itself as a financial hub, offering incentives to attract foreign businesses. The NSE proposed a collaboration with SGX in GIFT City to ensure trading happened in India and foreign investors could trade the Nifty index in dollars.

The Birth of GIFT Nifty:

After negotiations, the exchanges reached a deal, and on July 3rd, $7.5 billion worth of SGX Nifty contracts migrated to GIFT City in India. The SGX Nifty was renamed the GIFT Nifty, and NSE and SGX divided responsibilities, ensuring a continued revenue stream for both exchanges. This transition eliminates the need for investors to rely on SGX as an indicator of Indian market sentiment. Instead, they can now look to Gujarat for early insights.

Implications and Outlook:

The discontinuation of the SGX Nifty and the introduction of GIFT Nifty signify India's desire to retain trading activity within its borders and attract foreign investors to GIFT City. The move strengthens India's position as a financial destination and provides opportunities for traders and investors to engage directly with the Indian market.

Traders and investors should perceive this news as a positive step toward consolidating India's position as a major financial hub and seize the opportunities it presents for enhanced market engagement.