India’s financial markets are changing, and one of the new developments making waves with investors is GIFT Nifty. If you’ve been reading about market trends, you may have heard this term before, but just what is it? And how does it affect the Indian stock market? Let’s explore it in a new and easy-to-understand manner.
Once known as SGX Nifty, which was traded in a foreign country with limited control and restricted trading hours, it has now been brought home to India as GIFT Nifty. This move strengthens our financial markets, keeps trading volumes within the country, and positions India as a global trading hub. It allows investors to trade almost round the clock, giving them better access to international market movements. But what is it exactly? Let’s break it down.
GIFT NIfty in Short:
- Utilized to trade in Singapore exchanges under the name “SGX Nifty”.
- An index that facilitates future-based contracts.
- Made only for NRIs and foreigners; no Indian resident can buy and sell this index.
- Offers Indian market opening signals.
What is Gift Nifty? A New Era for Indian Market Trading
GIFT Nifty is basically the new incarnation of SGX Nifty—the well-known Singapore Exchange-traded futures contract based on the Nifty 50 index. The major change occurred when the trading shifted from Singapore to India’s Gujarat International Finance Tec-City (GIFT City), a special financial center with the aim to enhance offshore trading in India.
It is an NSE International Exchange (NSE IFSC) traded index that is meant to enable easier trading by foreign investors in the Indian stock market using futures-based contracts. Since this index invests in futures contracts, it allows investors to hedge against the volatility of the Indian market in a more efficient manner.
They can operate with risks without touching Indian exchanges directly. Furthermore, since it happens in US dollars, it circumvents currency exchange issues, simplifying the act of trading further.
With that, India maintains a greater percentage of its market trading activity locally within its financial system, securing its position within the international investment arena.
Timings
With two trading sessions within 24 hours, this international Nifty index remains open for 21 hours a day—one in the morning session and another in the evening session.
- Morning Session: 6.30 am – 3.40 pm
- Evening Session: 4.35 pm – 2:45 am
Who Can Trade in GIFT Nifty?
Indian resident investors are not allowed to trade on this global index despite its foundation on India’s Nifty 50. The prohibition ensures that local traders remain localized in Indian exchanges while preserving local markets in a domestic nature isolated from offshore trades.
But Non-Resident Indians (NRIs) and international investors are free to trade, provided they register through a recognized broker under the NSE International Exchange (NSE IFSC). This index has been created especially for international investors so that it will be simpler for them to reach Indian markets and hedge positions without having to go through India’s home exchanges.
Major Highlights of GIFT Nifty at a Glance
- Trades 21 Hours a Day
As opposed to India’s stock market, which is open from 9:15 AM to 3:30 PM IST, this 21-hour trading benchmark offers almost round-the-clock trading. This widened window (from 6:30 AM IST to 2:45 AM IST) enables investors to respond to global happenings and volatility even before the Indian markets open.
- Denominated in US Dollars
Whereas Indian stock markets deal in rupees, Gujarat International Finance Tec-City Nifty futures are settled in USD. This facilitates easier participation by foreign investors without any currency conversion risk.
- Multiple Contracts Available
Several types of futures contracts provided by NSE International Exchange
GIFT Nifty 50 (derived from Nifty 50),
GIFT Nifty Bank (derived from Nifty Bank),
GIFT Nifty Financial Services (derived from Nifty Financial Services),
GIFT Nifty IT (derived from the sector of Nifty IT).
The Impact of GIFT Nifty on the Indian Market
We can see in the main features that this global trade index provides various kinds of futures contracts. GIFT Nifty basically stands for our own Nifty indices but with a special view to foreign investors. It implies that whenever any major world news—positive or negative—happens, international investors respond to it through GIFT Nifty prior to Indian markets opening.
Since this internationally available Nifty futures contract is functional almost 21 hours a day, international investors are able to trade in such events in advance. Therefore, before Indian markets open at 9:15 AM, one can see gap-ups or gap-downs depending on whether GIFT Nifty has moved overnight. This makes Gujarat International Finance Tec-City Nifty an important early market sentiment indicator and probable price movement indicator of the Indian stock market.
Difference Between Traders & Investors?
Why Gift Nifty Matters to Investors
Even though this index is meant for foreign investors, it also has a significant role to play for Indian traders and investors. Why? Let’s find out.
Early Market Signals for Indian Traders
Since this trading index opens prior to Nifty 50 and other Indian indices, it serves as an initial market sentiment indicator. Its performance can be monitored by traders in order to determine their tactics prior to the Indian markets opening. As it closely tracks Nifty 50, its movements tend to forecast movements in the domestic market.
Benefits Beyond Traders
- For Foreign Investors:
It offers a structured and effective means of accessing the Indian stock market.
- For the Indian Economy:
It reinforces India as a global financial center by augmenting the amount of trade that takes place within the nation.
This makes GIFT Nifty not only an instrument for international investors but also a useful guide for Indian market participants.
Conclusion
In conclusion, the introduction of this new futures contract based in India marks a significant shift in how foreign investors engage with the Indian stock market. By allowing nearly round-the-clock trading, it enhances global accessibility to India’s financial markets, providing real-time responses to international market movements. This shift not only boosts India’s position as a financial hub but also helps reduce volatility and gap openings in the domestic market.
In addition, for foreign traders, it provides a seamless and effective means of hedging their positions, while Indian investors take advantage of the pre-opening market indications that guide them in their trading decisions. Overall, this action enhances the link between India’s financial markets and the global economy and opens up more avenues for investment.
FAQs
is an Indian Investor allowed to trade in GIFT Nifty?
No, Indian citizens cannot trade this international trading index. It has been specifically made for Non-Resident Indians (NRIs) and foreign investors in NSE International Exchange (NSE IFSC).
How is Gift Nifty different from Nifty 50?
GIFT City is where GIFT Nifty, a futures contract, is hosted, while Nifty 50 is traded on NSE in rupees. And while GIFT Nifty runs almost 21 hours a day, beating Nifty 50’s normal Indian market hours.
Does Gift Nifty impact the Indian stock market?
Yes, this foreign index mirrors the sentiment of global investors. Its movement tends to forecast the opening direction of the Indian stock market at 9:15 AM.
Timings of GIFT Nifty
- Morning Session: 6.30 am – 3.40 pm
- Evening Session: 4.35 pm – 2:45 am
Full Form of GIFT Nifty
This term represents “Gujarat International Finance Tec-City Nifty”.