Introduction

In this session, we will understand everything that is there to know about SGX NIFTY.

If you listen to any business news channel in the morning, you would have noticed the news anchors talking about how SGX NIFTY is indicating a gap up or gap down of 20 points, 50 points or even a hundred points.

So most of the beginners feel puzzled listening to such comments because they don’t understand what SGX NIFTY is.

So what exactly is SGX NIFTY? What is its importance? Is that something we can read? Should we keep track of that while we are trading?

Well, we will answer all these questions in this article.

All right, let’s get into it.

First of all, let us break these two terms down: SGX refers to Singapore Stock Exchange and NIFTY refers to our own NIFTY 50 indexes. So when you put them back together, it makes sense. So SGX NIFTY is a futures contract that is traded on the Singapore Stock Exchange.

So similar to how we trade NIFTY 50 futures in the Indian stock exchange, foreign investors can trade SGX NIFTY on the Singapore stock exchange.

Well, what is going on here? Why is a NIFTY contract trading on Singapore stock? After all, if someone wants to trade NIFTY, why won’t they just it on NSE? Why go all the way to Singapore for that?

So there are two types of investors or traders for whom it makes sense to trade SGX NIFTY.

The first are those traders who live outside India and because of international regulations, it is almost impossible to trade derivatives in any other country besides your own. So those traders who live outside India, they cannot trade 50-50 on NSE. Therefore SGX NIFTY becomes a great alternative for them.

The second are these foreign institutions that have investments in India.

See what happens are the mutual funds of many countries have significant portfolios in India because India is a growing economy. To protect their portfolio against some unlikely events, they create hedging positions in SGX NIFTY, especially during the hours when our Indian markets are closed.

Apart from these two, I’m sure there are other reasons for trading in SGX NIFTY, but these are the two primary ones. Now that we understand what SGX is, let’s answer some commonly asked questions about it. The first one is how do I track SGX NIFTY. The best source for tracking SGX NIFTY and its prices is moneycontrol.com.

There are alternative ways. For example, you can go to the Singapore stock exchange website, or you can go to other websites like investing.com. However, the accuracy of prices that you will find on moneycontrol.com is uncanny and the data is synced up pretty much all the time and so you should stick with moneycontrol.com.

Now the next question is very interesting and very commonly asked.

Can I trade SGX NIFTY?

Well, that depends on where you live. If you’re an Indian resident, you cannot trade the SGX NIFTY. If you live in India, you cannot trade any derivatives outside India and that is the law.

However, if you are an NRI, there is a possibility that you can trade the SGX NIFTY and will depend on the laws of the country that you are living in.

The next very commonly asked question, is

What is the market timing for SGX NIFTY?

In contrast to the Indian markets that are open for just about six hours, the Singapore stock exchange is practically open 24 X 7 and specifically speaking, the trading happens in SGX in these two-time slots.

They are called T and T plus. As you can see here, investors can trade in SGX NIFTY day and night with very few interruptions and that is probably one of the reasons why it is so popular outside of India. Now let me answer a very important question for all of you and the question is what is the importance of SGX NIFTY for an Indian trader?

The most important reason we even discuss is that every morning it gives us a sense of how Indian markets would open. If SGX NIFTY is indicating a big gap up or gap down, Indian traders mentally prepare themselves for their action plan when the market opens. So instead of waiting till 9 AM, they get this additional couple of hours to get their game plan ready.

Apart from that, some traders track SGX NIFTY even during night times, but I don’t see a lot of value in doing so. Now, let me answer a very important question for us. Does our market open at the same level where SGX is trading? So for example, if SGX is trading is let’s say 12,500, does it mean that NIFTY will also open at 12,500?

Ideally speaking, both NIFTY and SGX NIFTY should trade at the same time, but in reality, it doesn’t happen many times. Based on my experience, a lot of times, it can be very misleading. There are days when I’ve seen that NIFTY has indicated a large gap of a hundred points or 200 points.

When our market opened, the actual gap turned out to be very small. So it’s a good idea to keep track of SGX NIFTY so that at least you are mentally prepared, but blindly following SGX NIFTY is also not a good idea. Now, some of you have asked this question that how does SGX NIFTY work? How is its value calculated or derived?

So the answer here is very simple. Guys, just like the price of a stock is decided by supply and demand, the price of SGX NIFTY is decided by supply and demand and not by any calculations. If there is a heavy demand for that contract, the price of SGX NIFTY will go higher and if the suppliers are being more active, the price will go lower.

It’s basic economics. Now, here’s an interesting trivia about SGX NIFTY. SGX NIFTY is a very popular product among foreign investors and traders and that means that the Singapore stock exchange makes a lot of money off of it. That has become a bone of contention between the Singapore stock exchange and the national stock exchange because of course, NIFTY is an NSE product.

So both of these stock exchanges have been in a bit of a struggle and it all went to a point in 2009 when NSE refused to provide real-time data to SGX and the matter went for arbitration, but that was all in the past. The good news is that it looks like both parties are coming to a reasonable solution.

Anyway, going back to the big picture here, I hope that you have understood what is SGX NIFTY and how is it important to the Indian traders? If you have any questions, you know, feel free to ask in the comment section below. If you have not subscribed to the channel, please subscribe to it.

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