Nifty futures on the SGX is traded for 16 hours on that exchange while the Nifty now trades for 6.5 hours on the NSE Stock Market in India. Investors who are unable to access Indian markets, but who want to take an exposure in Indian market trade in SGX Nifty.
Since stock trading has been opened globally among countries, people or institutions or government in one country can trade with one another country. This has led to cases where change in the economic performance of one country has impact on the stock prices of another country. With the same ideology SGX Nifty trades in a foreign country (Singapore) but moves with respect to the Indian Nifty.
Who is allowed to trade SGX Nifty?
Any investor (basically citizens of other countries), interested in trading Nifty, but is not able to access Indian Markets, can use SGX Nifty as an alternative. Even the big hedge funds who have big exposure in the Indian market find SGX Nifty as a good alternative to hedge their positions.An Indian citizen is not allowed to trade SGX Nifty contracts. For that matter, Indian citizens are not allowed to trade derivatives in any other country.
Difference between NIFTY and SGX NIFTY
- SGX Nifty is a Nifty futures product traded on Singapore Stock Exchange platform whereas, the Indian Nifty contract trades on the NSE platform only.
- There is a difference in terms of contract size. CNX Nifty Futures contract consists of 75 shares per lot, whereas the SGX nifty does not have a contract with shares in it. It is basically just trading the index.
Buy n contracts (cost) = n x value of Nifty Index
- SGX Nifty is denominated in terms of US dollars. So, the pricing is a little different. Say, if Nifty is trading at 14000, then the contract size of SGX Nifty will be
14000 x 2 USD = 28000 USD
To simplify the above point, buying a good from a local grocery store (NSE) will be cheaper compared the price if bought from a import store (SGX).
- In India, in the case of Nifty, we see open Interest as the ‘number of shares’ outstanding. But in the case of SGX Nifty the open Interest shows the ‘number of contracts’ outstanding.
- The margin on SGX Nifty product is less than margin on Nifty Futures.
SGX Trading Hours
Indian Nifty (Index on NSE) starts at 9:15 am and operate till 3:30 pm, which means it trades for only six hours a day. On the other hand, according to Indian Standard Time, SGX Nifty functions from 6:30 am to 11:00 pm, which means which is 16 hours a day.How do settlements work in SGX Nifty?
The settlement is a cash settlement and the final settlement price is derived from the official closing price of S&P CNX Nifty. In Singapore, Nifty trades in two tranches. One part during the day time and it is denoted by ‘T’ in the records. Other trading session happens in the evening and is denoted by ‘T+1’. The trades happening in the evening will be settled on the next day.SGX Nifty has two serial monthly contracts and quarterly contracts. The contract expires on the last Thursday of the expiring month and if the last Thursday is an Indian holiday, then it expires on the preceding business day.
How SGX Nifty Impacts Indian Equity Market?
SGX Nifty trading even after the closure of the Indian Nifty market, means impact of global news on its price movement for the rest of the day (before NSE and BSE which are closed). This means the evening changes in the SGX Nifty would be visible in the opening price of Nifty, and the Sensex the very next day.Due to this long period of trading and the time difference between the two regions of two hours and thirty minutes, professional traders and investors find SGX Nifty extremely useful for their hedging requirements.
Many analysts use SGX Nifty as one of the factors to predict whether the initial direction of the Indian stock market, i.e, whether it will open higher or lower in a trading session and build strategy accordingly.
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Written by: Aastik Pasricha
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