Equity has become one of the most preferred instruments for investments today. With rapid digitization, aided by high speed internet and rising incomes, more and more investors today prefer investing in equity over traditional instruments of investments like real estate, fixed deposits, bonds and gold. However, in this rush to invest many people often ignore the basics. While investing in the stock market, it is very important to understand all the important terms associated with it including what is SGX Nifty.
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As an investor one of the most common terms you would come across is ‘Nifty’. You may have come across statements like:
– Nifty closed in red today
– Nifty bounces back by xx points
– Nifty gained xx points today
– Nifty closed in green today etc.
So if you are wondering what is Nifty? Here’s the answer.
Nifty is a benchmark index that represents top 50 companies listed on the National Stock Exchange (NSE) from different economic sectors. Nifty helps investors to understand how different companies which form a part of the Nifty are performing on a regular basis before investing.
What is SGX Nifty?
A derivative of the Nifty index, the SGX Nifty is traded in the Singapore stock exchange platform, where this trade sets a predetermined price of a share and reduces the future risk of any investments. In simple words, just like Indian Nifty which trades on NSE, a domestic stock exchange platform, the SGX Nifty is the futures trade nifty in Singapore. In case of SGX Nifty, as the price of the share is preset, the participants (buyers & sellers) have to commit to that predefined price irrespective of any changes taking place in the stock market in the future.
Being a part of a leading stock exchange, the movement of the SGX Nifty in the Singapore Stock Exchange is useful for predicting and observing the behavior of the Indian Nifty and hence is an important factor in the Indian stock market as well.
Difference between SGX Nifty and Nifty
The basic difference between SGX Nifty and the Indian Nifty is that the SGX Nifty is a futures trade platform in Singapore whereas the Indian Nifty trades only on NSE, the Indian stock exchange. Prices on SGX Nifty are predetermined to avoid the future risk.
The secondary difference between the SGX Nifty and the Indian Nifty is of the contract size. In Indian Nifty a minimum of 75 shares are required in a contract between the buyer and the seller. However, there is no such requirement in the case of SGX nifty. In simple terms, SGX nifty does not have a contract with shares, while Indian Nifty contracts must include shares.
Thirdly, as SGX Nifty is operational for sixteen hours a day there are large volumes of trading activities, making it one of the most active trading platforms in Singapore.
Impact of SGX Nifty on Indian Markets
As we have seen above, SGX Nifty is useful in predicting and observing the behavior of Indian Nifty. As there is a time difference between the SGX Nifty and Indian Nifty with the former opening 2.30 hours before the Indian market, investors can get an idea of what to expect when the latter opens.
In simple words, by observing the SGX Nifty, investors can get a view about the expected direction of the Indian market such as whether it will open in red or green. Hence, investors who have apprehensions about investing in the domestic market can invest in SGX and track the SGX nifty. However, it is also important to understand that there are certain economic differences between India and Singapore which may impact the behavior of the market. Besides economic factors, there are many other factors as well which may be relevant to markets in Singapore but irrelevant to India or vice-versa.
Both SGX Nifty and Indian Nifty are equally important from an investor’s perspective.
Now let’s take a look at some commonly asked questions:
Who can trade in SGX Nifty?
Investors who are unable to access Indian markets can trade on this platform.
Can Indian investors trade in SGX Nifty?
No Indian citizens are not permitted to trade in SGX Nifty. This is because currently there is a restriction in place which does not permit Indian citizens to trade in derivatives listed on foreign exchanges.
What are the trading hours of SGX Nifty?
It is open for trade on normal working days from 6.30 AM to 11.30 PM IST. The total duration for which trading can be done is 16 hours.
Click here to open a free trading and demat account and trade at the lowest brokerage rate of just Rs. 18/- per order.
– Written and contributed by Pradeep Sukumaran.