In order to have a profitable trading and investment portfolio, it is not sufficient to limit the study of the market only to trading hours. Beyond the normal trading session, there are multiple factors that affect the stock prices and market trends which are accounted for the next day. SGX Nifty is one of the factors that influence the Indian stock markets and investors take cues from its movements to understand the market trends. But why is an exchange in Singapore important to Indian Stock markets? Given below are the reasons for the same.
What is SGX Nifty?
SGX Nifty is the acronym used for the stock exchange in Singapore. Nifty on the other hand is the index in India and is a benchmark index for NSE (National Stock Exchange). These two components summed up together make for the SGX Nifty which is a platform for trading Indian Nifty on the Singapore Stock Exchange trading in futures trade Nifty in Singapore. On this platform, The buyer and the seller commit to the predetermined share price and have to stick to such price irrespective of any changes that may take place in the market trends in the future.
This platform is open for trade from 6 am to 11.30 pm on normal working days. This effectively makes 16 hours of trading which is a stark contrast from the Indian Stock markets which are functional from 9.15 am to 3.30 pm on normal working days. Therefore, the trades and the market trends on this index have an impact on the Indian counterparts.
Who can trade on SGX Nifty?
The SGX Nifty is available for trading for all investors who cannot access the Indian Stock Markets and want exposure to the Indian Nifty. However, this platform is not available for trading to Indian investors on account of the restriction placed on them that prohibit them from trading in derivatives that are listed on foreign exchanges.
What are the differences between SGX Nifty and Nifty?
Some of the key differences between SGX Nifty and Nifty are highlighted below.
- One of the key differences between SGX Nifty and Indian Nifty is that the former is a trading platform for futures in Singapore while the latter is the Index that is traded only in India on NSE.
- The SGX Nifty does not have a definite contract size for trading in futures. On the other hand, the Nifty on the Indian Stock Exchanges is traded in contracts or lots of 75 shares each.
- The number of traders and the volume of customers on the SGX Nifty is quite high as compared to Nifty as the exchange is open for a period of 16 hours which is quite longer than the trading hours for Nifty. SGX is therefore more profitable and is also usually seen to set the tone for the Indian Stock Markets.
How does SGX Nifty affect Indian stock markets?
The biggest advantage here is the time difference as it opens earlier as compared to the Indian Nifty. The Indian stock market has the pre-opening session at 9 am and normal trading hours from 9.15 am. The SGX Nifty opens at 6.30 am which gives the investors and traders an overall idea of the current market trends and any factors that have influenced the price trends of any individual stocks. While not all investors may be focusing on price trends on the SGX Nifty, seasoned traders and investors are quick to gauge the broad market sentiment. Also, traders who may be vary of investing in the Indian Stock Markets or may not be eligible for the same, can opt for this index and track the same to get a good understanding of Indian stock markets and the broad indices.
However, it is to be noted that the Nifty may not necessarily follow the price trends or the market trends of SGX Nifty. This is on account of various macroeconomic and microeconomic factors that affect the industry dynamics and the country as a whole. Some of such factors can be government policies, company financials, political scenarios, demographic structure, etc.
The correlation between SGX Nifty and Indian stock markets is undeniable. Given the proximity of the countries geographically as well as politically, investors and traders can have a general view of the Indian stock markets by following this index. The 16-hour trading window of the SGX Nifty allows it to absorb all the market fluctuations due to global events and presents a better scope of understanding the market trends back home.
SGX Nifty allows foreign investors and traders to trade in futures and also have the advantage of understanding the market trends due to the long trading hours that can have an influence on the Indian markets.
The long trading hours of SGX Nifty act as a double edge sword where it can absorb the impact of global news due to long trading hours but the same makes it more volatile as compared to the Indian stock markets.
As per the latest announcement of the Government of India, SGX Nifty will be traded in the GIFT (Gujarat International Finance Tec-City) City of Gujarat which is currently under construction on the banks of the Sabarmati river in Gujarat.
There is no concept of contract size on SGX Nifty.