It is a common practice for business channels, websites and the investing community in India to look for cues from SGX Nifty, before the domestic markets open for trading. And this has become more pronounced in the recent past as markets worldwide have been gripped by volatility arising from the continuous onslaught of COVID-19 pandemic. But what exactly is SGX Nifty?
The SGX Nifty is a derivative of Nifty index and trades on the Singapore Stock Exchange (SGX), which is one of the leading stock exchanges in Asia. Nifty is the benchmark index of the National Stock Exchange of India and is comprised of 50 major Indian companies listed on NSE, drawn from various sectors such as financials, banking, pharma, IT, FMCG, etc. The SGX Nifty has Nifty futures as the underlying. The SGX Nifty does not have constituent shares, whereas the NSE Nifty has a contract size of 75 i.e. each Nifty futures contract has 75 shares.
SGX Nifty has many advantages. The location of India and Singapore within the Asian continent facilitates a lesser time lapse and better connectivity between the two exchanges.
SGX Nifty is denominated in terms of US dollars, thus providing a good alternative to investors who do not have access to the Indian markets. Moreover, it is open for as many as 16 hours a day between 6:30 am to 11:00 pm (Indian time), thereby allowing foreign investors to take an exposure to Indian markets beyond the usual timings in India and gain leverage from the expanded working hours. This assumes special relevance to the hedge funds with significant exposure to the Indian markets.
The expanded time window also allows the market participants to take a view on the Indian markets based on overnight developments on Wall Street, without waiting for the Indian bourses to open later in the morning. In contrast to SGX Nifty, the NSE Nifty opens only at 9:15 am and closes at 3:30 pm, totaling a little over 6 hours a day.
One needs to, however, note that Indian residents are debarred from trading in SGX Nifty contracts.