GIFT Nifty vs. Nifty 50: Understanding the difference
When contemplating the Indian equity market, two common indices often mentioned are the GIFT Nifty and the Nifty 50. Although both play critical roles in understanding the market's move and investor sentiment, they are entirely different in terms of purpose and features. The blog will elucidate the differences between the two indices to help you make insightful decisions.
What is Nifty 50?
The Nifty 50 is one of the largest and most followed equity benchmarks in the country. It is managed by the National Stock Exchange of India (NSE) and comprises the top 50 companies listed on this exchange. The companies that form part of the Nifty 50 are from various sectors, giving a cross-sectional overview of the full Indian economy. Thus, most investors, fund managers, and analysts use the Nifty 50 as a thermometer for the Indian stock market. It also forms the underlying for a host of financial products, namely index funds, Exchange-Traded Funds (ETFs), and derivatives.
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The importance of Nifty 50 lies in the fact that it captures a considerable portion of the total market capitalisation of NSE. Since it is constituted by companies from almost all sectors, it captures India's market trend and the economic conditions prevailing in the country.
What is GIFT Nifty?
The GIFT Nifty, of course, is an idea that was born long ago. However, this Nifty is a new idea created out of Gujarat International Finance Tec-City (GIFT City). GIFT Nifty is part of an effort to create an international financial services hub in India. It is a derivative product where investors participate in trading futures contracts based on the Nifty 50 index but in a different time zone. GIFT Nifty's trading hours allow you to trade and be exposed to the Indian market hours other than the regular trading hours of the NSE. It, therefore, attracts the interest of international investor communities who wish to be exposed, albeit partially, to the Indian markets over and above the normal NSE trading hours.
GIFT Nifty is more flexible and has longer trading hours, giving you the possibility of reacting to global events before the NSE starts. Basically, this feature makes GIFT Nifty important for foreign investors who are interested in hedging positions or even speculating about the future of the Indian market.
Key differences between GIFT Nifty and Nifty 50
Purpose and scope:
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Nifty 50 is a benchmark index that takes into account the shares of the top 50 companies in India, quoting the performance in the Indian stock market.
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GIFT Nifty is a derivative product that provides increased hours of trading and participation in international markets.
Trading hours:
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Nifty 50 trades during regular NSE hours (9:15 AM to 3:30 PM IST).
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GIFT Nifty offers trading during international hours, catering to global investors.
Investor base:
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Nifty 50 caters mostly to domestic investors, fund managers, and analysts.
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GIFT Nifty attracts international investors who intend to gain exposure to the Indian market.
Location:
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Nifty 50 is based in India and managed by the NSE.
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GIFT Nifty operates out of GIFT City, Gujarat, and aims to establish an international financial services hub.
Market representation:
GIFT Nifty offers a way to react to global market events that might impact the Indian market before the NSE opens.
To sum it up
Both GIFT Nifty and Nifty 50 originate from the Indian stock market, but both maintain completely different features. The Nifty 50 forms a vital tool of measurement to understand the Indian economy. On the other hand, GIFT Nifty grants flexibility to global investors. You must understand the changes that take place in both through these differences if you would like to overcome the hassles in the equity market effectively.
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