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Did you know that the popular SGX Nifty is getting a major makeover? The new and improved GIFT Nifty is bringing a twist to India’s financial playground!
This shift marks the relocation of derivative contracts worth $7.5 billion from Singapore to India, specifically to the NSE International Exchange (NSE IX) in GIFT City, Gujarat. The move carries significant implications for India’s trade market and GIFT City’s emergence as a global financial hub.
What’s GIFT Nifty, and why is it a big deal?
GIFT Nifty is the rebranded version of SGX Nifty, a derivative contract on NSE’s Nifty index. From July 3, GIFT Nifty rock the market with two trading sessions covering Asia, Europe, and the US!
The NSE opposed the SGX’s plan to trade single-stock futures of India’s biggest companies. This exciting makeover comes after a five-year-old feud between the National Stock Exchange of India and the Singapore Exchange.
GIFT City: The futuristic hub of finance
GIFT City, located in Gujarat, is the emerging financial powerhouse set to rival global centres like Dubai, Mauritius, and Singapore. Gujarat International Finance Tech-city (GIFT) SEZ, India’s first International Financial Services Centre (IFSC) under the Special Economic Zone Act.
A dreamy 105 hectares of land devoted to financial services excellence! Back in April 2015, the Government of India brought the IFSC to life at GIFT Multi Services SEZ.
With derivative contracts shifting to GIFT Nifty, the revenue boost for the Indian stock market will be music to their ears!
The whos and wheres of GIFT Nifty trading
According to NSE IX, any trading member, whether Indian or foreign, registered or non-registered, can dive into the action by setting up an office through the subsidiary/branch model and obtaining membership of NSE IX.
Motilal Oswal Finsec IFSC Limited, Anand Rathi International Ventures (IFSC), Antique Stock Broking (IFSC), and others are some of the brokers. The trading members can trade for themselves and their clients.
Benefits of GIFT Nifty Trading
Trading GIFT Nifty contracts in the IFSC offers a myriad of advantages:
- Exemption from securities transaction tax (STT), commodities transaction tax (CTT), and dividend distribution tax.
- Capital gains tax and income tax waivers.
- A gateway to diverse dollar-denominated trading opportunities.
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GIFT Nifty trading hours: The ultimate advantage!
NSE IFSC Nifty 50 index futures hold the key to the stock market’s direction before regular Indian trading hours begin. The first session starts at 6:30 am and concludes at 3:40 pm, while the second session runs from 4:35 pm to 2:45 am the following day. Check them out early at 6:30 am IST to get a sneak peek into the market mood!
From July 3, the trading action includes GIFT Nifty 50, GIFT Nifty Bank, GIFT Nifty Financial Services, and GIFT Nifty IT.
This means we won’t be driven solely by international prices; we will set our tone and create our market dynamics.
GIFT Nifty’s revenue split
NSE International Exchange IFSC Limited, or NSE IX, is a subsidiary of NSE nestled in the vibrant GIFT City. Here, stock exchanges have the freedom to offer trading in securities using any currency other than the Indian rupee.
At NSE IX, investments are in dollar terms, making all dollar-denominated Nifty derivatives exclusively traded on this platform.
Let’s put things into perspective: In 2022 alone, SGX Nifty futures boasted a daily average turnover of a staggering $3.9 billion, with an average open interest of $9.6 billion. Now, the offshore market’s turnover will be generated onshore in the heart of Gujarat’s Gift City.
In FY22, Nifty derivative contracts played a pivotal role in boosting SGX’s equity derivative volumes, ranking second after SGX FTSE China A50 Index futures. These contracts not only contributed to SGX’s revenue but also helped increase NSE’s revenue through higher fees and trading volumes.
NSE and the Singapore Exchange will be sharing the revenues right down the middle, approximately 50-50. It’s a win-win situation that brings together the best of both worlds.
The move from the Singapore Exchange to NSE IX is another stride towards the government’s ambitious goal of transforming GIFT City into a bustling hub for Indian and global financial and IT businesses.
Indian nationals are not able to trade on the GIFT Nifty. The only people who can do this are non-resident Indians (NRIs) and foreign portfolio investors (FPIs). NRIs can trade Gift Nifty through a broker who is an NSE IX member.
A GIFT City investment is taxed more efficiently. If you invest in an ETF that holds global stocks for longer than 24 months, the tax rate will be 20% with indexation. If the investment is made in Indian stocks, the tax rates follow the Indian capital gains rules.
The primary difference between Gift NIFTY and NIFTY 50 is that Gift Nifty will be traded in US dollars. Due to this, trading in the Nifty 50 index will be simpler for foreign investors, and hedging exposure to the Indian rupee will be simpler for Indian investors.
Businesses operating inside GIFT City’s Special Economic Zone (SEZ) are eligible for several tax perks and exemptions. These benefits make it a tax-efficient location for businesses, with reductions in income tax, capital gains tax, dividend distribution tax, and customs duty among others.
’GIFT’ stands for ‘Gujarat International Finance Tec-City’. GIFT IFSC ranked first among developing financial centres and tenth in the finance industry in 2020. It is home to two international stock exchanges, 35 fintech companies, and 23 multinational banks as of June 2023.