GIFT Nifty: Revolutionizing Stock Exchanges in India’s Financial Hub of Gujarat

In the bustling financial hub of Gujarat, a significant transformation is underway with the introduction of GIFT Nifty, revolutionizing stock exchanges in India’s economic center. The partnership between India and Singapore to connect their financial markets will now take place in GIFT City, which is India’s first international financial services center, located in Gandhinagar.

In a significant move to make India a global financial hub. An equity index that used to be managed in Singapore will now be traded exclusively from GIFT City. GIFT City is India’s first International Financial Services Centre (IFSC) located in Gandhinagar.

The SGX Nifty

The SGX Nifty which is based on India’s National Stock Exchange’s Nifty index. It was the first effort to connect India and Singapore’s financial markets. Now, it has moved from the Singapore Exchange (SGX) to the NSE’s International Exchange (NSE IX) situated in GIFT City. Along with this move, the index has been renamed as the GIFT Nifty.

The SGX previously traded Nifty futures and options in U.S. dollars through an agreement with the NSE. Reports indicate that this trading reached substantial levels, with a daily average turnover of around $3.9 billion in 2022.

Moving the exchange to India marks the official start of NSE IFSC-SGX Connect. A joint effort between SGX and NSE to trade stock index-based products and encourage global investments in India.

The GIFT Connect initiative unites both international and local participants in GIFT City. To form a larger pool of funds for trading Nifty products. In simpler terms, this action will not only strengthen India’s domestic market but also expand its reach and recognition internationally.

In a statement, Injeti Srinivas who leads the International Financial Services Centres Authority (IFSCA). Mentioned that this change will bring together the global pool of funds for NIFTY products. It will also enhance GIFT-IFSC’s position as a global hub for international financial products and services.

The IFSCA is a single authority responsible for overseeing the growth and rules of financial products, services and institutions in India’s. International Financial Services Centres (IFSCs).

GIFT City and GIFT Nifty: Transforming India’s Financial Landscape

GIFT City, a global financial hub between Ahmedabad and Gandhinagar, introduces GIFT Nifty, revolutionizing stock exchanges with USD-based Nifty derivatives trading. This developing business district is designed to be a smart city that meets global standards offering an environment for important economic activities. With top-notch regulations, taxation and policies.

GIFT Nifty, previously called SGX Nifty, is a type of financial contract. These contracts get their value from something else, like the price of company stocks in this case. Instead of trading actual company stocks directly, people can also trade these financial contracts separately. Trading in these contracts began in June 2017 through NSE IX. The move of SGX Nifty to Gujarat offers another option to trade Nifty derivatives that are valued in US dollars.

On July 3rd, trading in the USD-based GIFT Nifty began. There were contracts worth USD 8.05 billion in Nifty Futures. USD 1.05 billion in Nifty Options from international clients of the Singapore exchange. During a single session, they made more than 30,000 trades.

In simpler terms, it shows how much trading is happening on the exchange. GIFT Nifty will have two trading sessions each day, giving you a total of 21 hours to trade. The first session will be from 6:30 AM to 3:40 PM. The second session is designed to attract investors from Europe and America. Running from 4:35 PM to 2:45 AM according to Indian Standard Time.

Global Financial Synergy: NSE IFSC-SGX Connect

The NSE (National Stock Exchange) of India has had a partnership with the Singapore Exchange (SGX) for over 22 years. Starting in July 2022, GIFT Connect is a joint effort between SGX and NSE. It enables global investors to easily trade Indian stock derivatives without facing regulatory obstacles.

GIFT Nifty is revolutionizing stock exchanges in a manner similar to the way people can seamlessly invest between the Shanghai Stock Exchange and the Hong Kong Stock Exchange. With GIFT Connect, a new avenue has opened for investors to trade between the Singapore Exchange and India’s GIFT City, expanding opportunities for international investments.

Since 2019, NSE IFSC and SGX Connect have been actively discussing their collaboration after a brief disagreement between the two global markets. In 2018 NSE ended its agreement with SGX and SGX launched derivative products that NSE believed infringed on its intellectual property rights.

As per a report in Business Standard, NSE took legal action against SGX in Bombay High Court without informing SGX. In September 2020, both sides resolved the matter and agreed to work together. NSE arranged the NSE IFSC-SGX Connect deal in 2020 through a joint agreement.

The agreement started and is valid for five years, with the possibility of extension for an additional two years. At first, SGX will receive 75% of the money made from GIFT Nifty, and NSE will get the remaining 25%. Once they achieve a certain amount of revenue, they will equally split it, with each party receiving 50%.

GIFT Nifty: A Boon for Smart Investors

This move is part of India’s efforts to attract trading focused on India. Compete with global financial hubs like Dubai, Mauritius, and Singapore. The goal is to raise money for Indian products, bring markets to India. Have the prices of Indian products in dollars available across different time zones. In other words, they want to make India’s trading in derivatives international.

However, regular Indian investors can’t trade in GIFT Nifty under the RBI’s Liberalised Remittance Scheme (LRS). This scheme allows Indian citizens to send money abroad but it has some rules and restrictions on investing in foreign markets.

Moving to India will be advantageous for foreign investors. They can now enjoy exceptions from various taxes like Securities Transaction Tax (STT), commodity transaction tax, GST, dividend distribution tax and capital gains tax. These exemptions are provided to entities working in the GIFT Special Economic Zone.

The Reasons Behind GIFT Nifty’s Move to India

In the 2022 fiscal year Nifty derivative contracts played a significant role in SGX’s equity-derivative volumes accounting for 29.9 million contracts. Singapore is a thriving financial center outside India with advantages like low taxes, easy registration, and operational ease. This makes it attractive for international traders who want to avoid dealing with India’s stricter Securities and Exchange Board of India (SEBI). Which oversees securities and commodity markets.

Traders used SGX Nifty to predict Nifty 50’s performance before the Indian market opened. Thanks to the time difference between Singapore and India. Over time, the trading of SGX Nifty futures became as big as what was happening in India. The Indian government wanted to keep these trades in India to benefit the country and have more control over capital.

Efforts to prevent trading from happening outside the country and to promote a tax-free trading area in Gujarat were actively made. They did this to connect India to the global financial system.