The Indian financial market is witnessing a significant shift as the SGX Nifty, an early indicator of the Indian equity market, moves from Singapore to India’s GIFT City (Gujarat International Finance Tec-City) in Gujarat. With this move, it has been renamed as Gift Nifty, symbolizing a new era in the Indian financial landscape. In this article, we will explore the implications of this transition, the benefits it offers to investors, and the potential it holds for the Indian economy.
GIFT City: A Gateway to Global Financial Services
GIFT City is India’s ambitious project to establish an international financial services center that rivals global financial hubs like Dubai, Mauritius, and Singapore. Located between Ahmedabad and Gandhinagar, GIFT City is a fully-operational greenfield smart city designed to provide a conducive ecosystem for economic activities with globally benchmarked regulations, taxation, and policies. It aims to attract both domestic and international investors by offering a tax-friendly environment, dollar contracts, and state-of-the-art infrastructure.
The Evolution of Gift Nifty
Formerly known as SGX Nifty, Gift Nifty is an index derivative contract based on India’s Nifty index. It serves as an early indicator of the Indian equity market, providing investors with insights into the likely opening trends. Until recently, these derivatives were traded on the Singapore Exchange, attracting significant volumes from overseas traders seeking to avoid the complexities associated with the Indian regulatory framework.
The Shift to GIFT City
To consolidate trading activities and promote onshore investments, the derivatives contracts of SGX Nifty, valued at approximately $7.5 billion, have been shifted to the NSE International Exchange (NSEIX) in GIFT City. This move signifies a strategic effort by the Indian government to bring offshore trading within India’s borders and harness the benefits for the nation’s economy. The transition has been smooth, and all the contracts have been seamlessly transferred, ensuring continuity for investors.
Extended Trading Hours and Expanded Offerings
With the transition to GIFT City – NSEIX, Gift Nifty offers more trading hours compared to SGX Nifty. Investors can now access the market for 21 hours a day, divided into two sessions. The first session runs 21 hours with timing from 6:30 a.m. to 3:40 p.m., catering to domestic and Asian investors, while the second session from 4:35 p.m. to 2:45 a.m. targets European and American investors. The extended trading hours enable a broader global participation in the Indian equity market and facilitate round-the-clock trading activities.
Under Gift Nifty, investors can choose from four derivative contracts: Gift Nifty 50 Futures, Gift Nifty Bank, Gift Nifty Financial Services, and Gift Nifty IT. These contracts provide investors with diverse options to gain exposure to specific sectors or the broader market, depending on their investment strategies and risk appetite. The availability of multiple contracts enhances market liquidity and promotes efficient price discovery.
Gift Nifty offers several advantages for investors, both domestic and international. One of the significant benefits is the exemption from various taxes and charges. Investors trading in Gift Nifty contracts are exempted from the Securities Transaction Tax (STT), Commodities Transaction Tax (CTT), Goods and Services Tax (GST), Dividend Distribution Tax (DDT), and capital gains tax waivers. These exemptions make trading in Gift Nifty more cost-effective and attractive for investors.
While non-resident investors can access Gift Nifty contracts, retail traders from India are currently prohibited from trading in these derivatives under the RBI’s Liberalised Remittance Scheme (LRS). However, Indian companies with subsidiaries in GIFT City can engage in Gift Nifty trading, leveraging the benefits of this new financial hub. The restrictions on retail traders are in place to ensure prudent risk management and prevent excessive leverage.
Implications for the Indian Economy
The shift of Gift Nifty to GIFT City has broader implications for the Indian economy. India aims to position itself as a global financial center, attracting international investments and promoting the setting of prices for Indian products in dollar terms across various time zones. By consolidating trading activities and offering tax incentives, GIFT City seeks to internationalize India’s derivatives trade and compete with established global financial centers.
The establishment of GIFT City as a vibrant financial hub will bring numerous benefits to the Indian economy. It will attract foreign investments, stimulate economic growth, and create employment opportunities in the financial services sector. The development of world-class infrastructure and the implementation of globally benchmarked regulations will enhance India’s competitiveness as a financial destination, fostering innovation and collaboration with international market participants.
The transition of SGX Nifty to Gift Nifty and its relocation to GIFT City marks a significant milestone in India’s journey towards becoming a global financial center. With extended trading hours, diverse derivative offerings, and attractive tax benefits, Gift Nifty offers investors a new avenue to participate in the Indian equity market. GIFT City’s emergence as a hub for international financial services will not only deepen the Indian market but also expand its reach and acceptance globally. The shift to GIFT City represents India’s commitment to creating a thriving and competitive financial ecosystem that serves the needs of domestic and international investors alike. Track Gift Nifty Live Intraday Chart, to prepare your trades