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SGX Nifty: Overview, Advantage and Disadvantage

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The stock market has gained popularity among investors in recent years. You’ve undoubtedly heard of the SGX Nifty, Nasdaq, Sensex, and Nifty if you’re new to investing. This article delves into and highlights its distinctions from Nifty, its influence on Indian markets, and its benefits.

Nifty: Overview

Nifty stands for the National Stock Exchange Fifty and serves as the primary stock market benchmark on the National Stock Exchange (NSE) in India. Comprising the top 50 large-cap companies from diverse sectors listed on the NSE, the Nifty index offers a barometer of overall market sentiment and trends. It enjoys extensive attention from traders, investors, and financial institutions, serving as a pivotal gauge for evaluating the performance of the Indian stock market and forming the foundation for derivative instruments such as Nifty futures and options.

SGX Nifty: What is it?

SGX Nifty, also known as the Singapore Nifty, is a stock contract tied to India’s Nifty 50 index, which is listed and traded on the Singapore Exchange (SGX). It permits investors from outside of India to participate in the Indian stock market, even during times when the Indian markets are not operational.

It helps as an indicator for the expected opening level of the Nifty 50 index, influenced by the trading activity in SGX Nifty futures. Traders and investors depend on Nifty as a point of reference to assess market sentiment and make informed trading decisions prior to the commencement of trading in the Indian stock market.

It is traded on the NSE International Exchange (NSE X). The substantial sum of derivative contracts, valued at 7.5 billion dollars, which was previously traded in Singapore, has been relocated to India. Consequently, It has been delisted from the Singapore Exchange.

Impact of SGX Nifty on the Indian Stock Market

The influence of SGX Nifty on the Indian stock market is noteworthy. Serving as an early signal before the commencement of Indian trading, It acts as a pre-market indicator, providing a glimpse of the expected opening level of the Nifty 50 index. Traded during Singapore market hours, it empowers investors to gauge market sentiment and make informed decisions ahead of the Indian stock market’s opening. The movement of this often sets the tone for the initial trading hours in India, thereby impacting early trading patterns.

For intraday traders, the fluctuations help in assessing whether to take short or long positions. Notably, It tends to demonstrate greater volatility when compared to NSE Nifty. However, it is important to emphasize that relying solely on this parameter for predicting the Indian stock market is not advisable; taking into account other pertinent factors is crucial.

Differences Between SGX Nifty and NSE Nifty

  • Trading Hours: NSE Nifty operates from 9:15 AM to 3:30 PM, providing a six-and-a-half-hour window, while it trades from 6:30 AM to 11:30 PM IST, offering a 16-hour trading day on the Singapore Stock Exchange.
  • Impact of Global Events: The longer trading hours of SGX Nifty ensure that the impact of global events is felt more profoundly on the stocks traded in that exchange.
  • Early Decision-Making: Its futures are favored by traders for early decision-making compared to NSE Nifty.

Advantages of SGX Nifty

  • Foreign Investor Attraction: It encourages more foreign investors to participate in the Indian derivative market.
  • Proximity and communication: Its Singapore location, near India, enables improved communication between the two exchanges and decreases trading time lags.
  • Access to US Dollar Transactions: It is an excellent choice for investors who do not have direct access to Indian markets and wish to deal in US dollars.
  • Extended Trading Hours: The extended trading hours of the SGX Nifty give leverage for transactions, particularly for hedge funds.
  • Overnight Market Insights: With a 16-hour trading window, market participants can base their decisions on overnight developments in Wall Street, enhancing their decision-making capacity.

Disadvantages of Trading in SGX Nifty

  • Higher Volatility: It tends to be more volatile than NSE Nifty, influenced by global economic cycles and political events.
  • Indian Resident Restrictions: Indian residents are prohibited from trading in SGX Nifty contracts.

Recent Developments

In a recent development as of July 2023, there has been a significant transformation in the SGX Nifty, which has now been rebranded. With this rebranding, derivative contracts valued at USD 7.5 billion, previously traded in Singapore, will be relocated to India. This shift is aligned with the strategic positioning of SGX City, the emerging financial center in Gujarat, India, which is being nurtured by the Indian government to rival other global financial hubs such as Singapore, Dubai, and Mauritius. Consequently, trading has been suspended on SGX and the index is slated to be delisted from the exchange.

Conclusion

Nifty and SGX Nifty are pivotal indices in the market. When considering investments, it is crucial to evaluate your investment objectives and risk tolerance. Conduct comprehensive research and make well-informed decisions. To initiate your investment journey, you can set up a demat account you must first open a trading account with a broker before making your initial deposit. This account allows you to purchase and sell shares on the Singapore Stock Exchange. Angel One at no cost.

FAQs

1. What is the new title of SGX Nifty?

On July 3rd, the SGX Nifty underwent a name change to GIFT Nifty. Commencing on July 3, 2023, the well-known SGX Nifty index will be known as GIFT NIFTY, aligning with global trading advancements.

2. How can I engage in trading on SGX?

You must first open a trading account with a broker before making your initial deposit. This account allows you to purchase and sell shares on the Singapore Stock Exchange.

3. What is the minimum trade size on SGX?

The standard board lot size for stocks at the Singapore Exchange (SGX) has been reduced from 1,000 to 100 units. Consequently, ordinary retail investors now have the option to purchase a minimum of 100 shares, granting them access to several high-priced blue-chip stocks.

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