Introduction:
Investing in stocks for wealth growth has become increasingly popular in recent times. With a growing number of individuals showing interest in stock market investments, it becomes essential for investors to understand crucial terms associated with the stock market. When perusing financial news in print or online, you often come across the term "Nifty".
But do you know what exactly Nifty is? Nifty is essentially a curated selection of the top 50 companies listed on the National Stock Exchange (NSE). These companies span across various economic sectors and industries. As an investor, you can trade Nifty as a derivative in the stock exchange. Another crucial aspect that you must know about the Nifty index is that it is traded as a derivative with different names on various stock exchanges in the world.
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For example, it is traded as a derivative on the Singapore Stock Exchange (SGX) as the SGX Nifty. Continue reading to learn more about the SGX Nifty and its relation with the Indian Nifty.
What is SGX Nifty?
SGX Nifty – an abbreviation for Singapore Nifty – is a derivative of Nifty 50 traded on the Singapore Stock Exchange (SGX). SGX Nifty was recently renamed to GIFT Nifty. This offshore derivative trading platform allows international investors to invest in Indian derivatives without being physically present in India.
As the Singapore Stock Exchange is one of the biggest stock exchanges in the world, SGX Nifty is one of the most frequently traded index derivatives in the world. However, the trading of SGX Nifty is restricted to Non-Resident Indians (NRIs) and foreign portfolio investors. SGX Nifty is a viable option for investors who cannot participate in NIFTY trading. It's important to note that Indian residents are prohibited from trading in the SGX Nifty.
Key benefits of SGX Nifty
The primary benefits of trading in the SGX Nifty include:
One of the significant advantages of SGF Nifty is its trading hours, which overlap with both the Indian and global markets. This enables investors to respond to market developments in real-time, even when the Indian market is closed.
While you can trade in the Indian Nifty only during market hours, the Singapore Stock Exchange allows SGX Nifty trading for 16 hours, i.e., even after market closing. This allows traders to capitalise on extended market hours, increasing opportunities for leveraging their positions.
Another advantage of SGX Nifty is that it allows traders to take advantage of different time zones in India and Singapore. While the trading hours for Indian Nifty are from 9:30 AM to 3:30 PM, SGX Nifty can be traded between 6:30 AM and 11:30 PM Indian Standard Time (IST).
It allows investors to take advantage of early indications to speculate the direction in which the market can move. Based on the movements in the Indian Nifty, an investor can take positions in the SGX Nifty and vice versa.
Also, arbitrage opportunities may arise due to the difference in time zones between India and Singapore. Traders can exploit price differentials between the SGF Nifty and the Indian Nifty, although such opportunities are usually short-lived.
- Higher volume and liquidity
As mentioned, SGX Nifty is one of the most popular derivatives among international traders. Hence, it attracts substantial daily trading volumes, resulting in higher liquidity than Indian Nifty. The higher liquidity of this instrument allows for the efficient execution of trades.
Disadvantages of SGX Nifty
The disadvantages of trading in SGX Nifty include:
- SGX Nifty is more volatile than Indian Nifty as it is highly influenced by global economic cycles and events on the international political stage. Hence, it entails greater risks
- Indian residents are not allowed to trade in SGX Nifty. Only NRIs and foreign portfolio investors are allowed to do so
- The extended trading hours of the SGX amplify the influence of global events on the stocks traded on the exchange. Moreover, traders turn to SGX Nifty futures for early decision-making compared to NSE Nifty futures
To conclude
In conclusion, SGF Nifty provides international investors with a gateway to the Indian equity market. Its correlation with the Indian Nifty and the advantages of trading on a global platform makes it a preferred instrument for diversifying portfolios or managing risk efficiently.
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