Investing in stocks to grow your money has become more common and popular in recent times. As more and more people are becoming interested in investing in stocks, the need to understand all the important terms that are related to the stock market has also increased. When you read finance-related news in a newspaper or an online news site, you will often come across the term Nifty. These news stories are often about how the points in this platform are going up and down. So what exactly is this Nifty? Nifty is nothing but a small sample of 50 companies of the index market, belonging to different economic sectors that are introduced by National Stock Exchange or NSE, which is an Indian stock exchange platform. To better understand this platform, it is also important to know that every country has its own platforms for stock exchange. However, although Nifty is India's platform for stock exchange that helps investors understand how a company performs daily before making a big investment, there is another term that most people get confused with. This term is SGX Nifty. But before we go on to understand what SGX nifty actually is, let's take a little more time to get familiar with the term Nifty.
What is Nifty?
Nifty was launched on the 22nd of April 1996 and is owned and managed by NSE indices. As discussed above, Nifty is a stock market index for the Indian Stock Exchange (NSE) platform. It represents 50 companies that are some of India's largest companies and puts forth their weighted average to help investors know about the performance of the companies in the stock market. It is one of the two main stock exchange indices in India, the other being BSE SENSEX.
Nifty lists the companies according to their stock market performance and puts them in a ranking system that keeps the company performing the best at the top. By conducting surveys of the top listed companies, Nifty gives a hint to the investors about which company has the potential to perform well in the future so that they can invest accordingly to reap the maximum profit.
Now that we have a basic knowledge about what nifty is, let's shift our focus to what we actually came here to learn about—SGX Nifty.
What is SGX Nifty?
SGX Nifty is a derivative of the Nifty index, which 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. To make it easy for you to understand, you should keep in mind that like Indian Nifty trades on the NSE, which is the Indian stock exchange platform, the SGX nifty is the futures trade nifty in Singapore where as the price of the share is preset, the buyer and seller have to commit to that pre-decided price in spite of any changes that may take place in the stock market in the future.
As the Singapore Stock Exchange is the leading stock exchange in India, the SGX nifty helps to predict and observe the behaviour of the Indian Nifty and thus has an important role to play in the Indian stock market.
How is SGX Nifty different from Indian Nifty?
The main difference between the SGX Nifty and the Indian Nifty is that the SGX Nifty is a futures trade platform in Singapore where the prices of a stock are predetermined to avoid the future risk, whereas the Indian Nifty trades only on the Indian stock exchange platform, which is the National Stock Exchange or NSE.
Another important difference is the contract size of the Indian Nifty and the SGX nifty. In an Indian Nifty a contract between the buyer and the seller must have a minimum of 75 shares, which is not required in the SGX nifty. This means that SGX nifty does not have a contract with shares, whereas every Indian nifty must include shares.
SGX Nifty sees a high amount of customers and trading activities because it is the most active trading platform in Singapore and the only trading platform that works for sixteen hours a day. This is definitely not the case with the Indian Nifty, which is a National exchange platform. These characteristics of SGX nifty make it more profitable.
How does SGX Nifty impact the Indian Market?
As we already discussed, the SGX Nifty proves to be helpful in predicting and observing the Indian Nifty's behaviour. There is also a time difference between the Indian Nifty and the SGX Nifty, wherein the Singapore market opens about two and a half hours before the Indian market. This allows investors to keep an eye on the SGX nifty to know the fluctuations in the market and observe how the overall trading process is going. By observing this, the investors get an idea about the Indian market and whether it will open with positive or negative results. Therefore, those who are skeptical about investing in the Indian market can invest in SGX and keep an eye on the SGX nifty to get an idea about the Indian nifty and stock exchange platform beforehand.
Although this may be a convenient way to judge the Indian market and weigh out your chances, not all results these investors get are accurate and subject to the various economic factors existing in both countries. As both these countries—India and Singapore have very different economic structures it has different yet prominent effects on the market behaviour.
Both the Indian Nifty and SGX Nifty are equally important as they have some effects on each other's behaviour, and you cannot talk about one without mentioning the other. Everyone who wishes to enter the stock market world and start trading like an expert needs to first know and be familiar with Nifty and SGX Nifty terms and many other financial terms commonly used and have important roles to play in the stock market.
Advantages of SGX Nifty
Encourages more foreign investors to invest in the Indian derivative market. The proximity in location between India and Singapore ensures that there is better connectivity between the two exchanges and lesser time lapse. It serves as a good alternative to investors who do not have access to Indian markets especially if they seek to transact in terms of US Dollars. The expanded working hours of SGX Nifty provides leverage in transactions, especially with regard to the hedge funds. The 16 hour time window also allows market participants to take a view on the Indian markets based on overnight developments in Wall Street enhancing their decision making capacity.
Disadvantages of Trading in SGX Nifty
SGX Nifty is more volatile than NSE Nifty, affected by world economic cycles and global political events. Indian residents are prohibited from trading in SGX Nifty contracts. Difference Between SGX Nifty and NSE Nifty The Indian stock market opens at 9:15 AM and closes at 3:30 PM, providing it a six and a half hour window to operate. The SGX Nifty, on the other hand, operates from 6:30 AM to 11:30 PM IST, trading for 16 hours a day in the Singapore Stock exchange. The longer trading hours on the SGX ensures that the impact of global events is more advanced on the stocks traded in that exchange. Additionally, the SGX Nifty futures is referred to by the traders for early decision making as juxtaposed to NSE Nifty.
Latest Developments
The NSE and SIGX have entered into a formal agreement to operationalize ‘NSE IFSC-SGX Connect’, which will bring Gujarat International Finance Tec-City (GIFT) participants and international participants together to create a bigger liquidity pool for Nifty products in the GIFT City. SGX has decided to launch single stock futures and the SEBI wishes to counteract the possibility of foreign exchanges becoming price setters for the India Market and the growing market share of SGX through a slew of protectionist measures.
