The Nifty futures contracts trading on the Singapore Exchange (SGX) will begin at International Financial Service Centre (IFSC) in Gandhinagar from Friday onwards. Prime Minister Narendra Modi will launch the dollar-denominated Nifty futures and inaugurate the India International Bullion Exchange (IIBX) at the Gujarat International Finance Tec (GIFT) City.
“It’s a soft launch of SGX Nifty Futures on the GIFT-IFSC,” a person in the knowledge of the development told Economic Times. According to the report, initially, during the first few months, SGX Nifty Futures will be traded simultaneously on GIFT-IFSC and SGX. Later, SGX will discontinue the trading of the product from Singapore.
A Special Purpose Vehicle (SPV) ‘NSE International Financial Service Centre (IFSC) SGX Connect’ has been formed by National Stock Exchange and SGX to launch the products at Gift City. SGX Nifty Futures will reportedly be traded at GIFT city for close to 19 hours a day.
What is SGX Nifty?
SGX Nifty, also known as a Singapore Nifty, involves taking a position in the Singapore Exchange on Futures contracts. The Futures contracts settlement is based on the NIFTY settlement price on the Indian stock exchange NSE. This gives international investors the flexibility of betting on Indian markets without having to setup or register the entity with the Indian authorities. Since the SGX allows for 24-hour trading via after market trades, investors can hedge their bets at any time. Plus, it is also considered a good indicator of where the Indian market will open the next day, due to this a lot of traders follow this to check how SGX Nifty is doing.
SGX initiated legal proceedings against NSE after the latter terminated its agreement with the Singapore-based exchange. In 2018 India’s stock exchanges decided to stop licensing their indexes from August 2019 to foreign bourses amid concerns over flight of trading to Singapore. The two exchanges withdrew proceedings after entering into an agreement for a connectivity pact at GIFT City. Nifty futures volumes in Singapore at 80 per cent higher than in India.
In the year 2021, the average daily volume on NSE was Rs 14,500 crore compared to Rs 26,000 crore in SGX. Foreign portfolio investors (FPIs) had shifted their positions to Singapore due to more favourable taxation and preference for a dollar-denominated product.
Move To Benefit Foreign Investors
Sonam Srivastava, Founder at Wright Research, said “SGX Nifty which is a derivative of the Indian Nifty index pulls in 80 per cent more volume than the local index futures. So bringing that volume to India by bringing the SGX Nifty to the GIFT city is a fantastic move to bring in foreign capital to India. SGX which initially protested this move is now collaborating with GIFT city with a connectivity pact. Along with bringing the volumes to India, trading on Gift City would benefit foreign investors who can enjoy a minimum alternate tax (MAT) of 9 per cent and exemptions concerning stamp duty and tax.”
GIFT City is a planned business district in Gujarat, India. It is the new business destination offering a competitive edge to Financial services and Technology related activities. Integrated development with the Walk to Work concept adds immense value to the business activities. The government has also slashed taxes at the GIFT city to compete with regional finance hubs like Singapore, Dubai, and Hong Kong.
Prime Minister Modi will also be inaugurating the India International Bullion Exchange, which is jointly owned by NSE, Multi Commodity Exchange (MCX), India INX International Exchange, National Securities Depository (NSDL), and Central Depository Services (India). About 60 qualified jewellers have already been taken on board.
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