Introduction
Singapore Exchange, i.e., the Stock Exchange of Singapore—so it is SGX. The nifty trade index is derived into SGX in this Exchange. The settlements regarding transactions on the SGX Nifty occur in the Singapore Exchange. SGX Nifty provides an avenue for those who cannot trade on the NSE in India. The market for futures on the NSE remains open only for six and a half hours in India, while the SGX Nifty remains open for 16 hours and even beyond the closing of the Indian markets. This facilitates leveraging from more extended market hours.
The SGX opens at 8 a.m. Singapore time on all working days. You are permitted to trade on this index from 6:30 a.m. to 11:30 p.m. concerning Indian time.
As India and Singapore are on the same continent, the geographical location itself ensures a lesser time lapse between the two places and, subsequently, better connectivity between the two exchanges. Much before the opening of Indian exchanges, SGX Nifty opens at 8 AM Singapore time and hence is where the markets in India get their initial direction from.
While SGX is more volatile than its peer Liz Indian counterpart, Nifty, both the derivatives move in tandem. External factors are galore for the volatility of the SGX Nifty; one contributing factor would be the extended working hours compared to those of Nifty.
SGX Nifty incorporates the facility of trading in Nifty derivatives not only at the Singapore exchange but has also opened doors for global players to trade Indian derivatives. By doing this, it has encouraged more and more foreign investors to invest in the Indian derivative market.
Though sociopolitical, economic, domestic, and global factors affect the NSE on one hand, it has to be viewed as a myth that these do affect the SGX Nifty, too.Any share market app can easily verify that SGX Nifty often moves independently of the daily performance of the NSE.
Origins:
It was in the year 2000 that the Singapore Exchange introduced futures contracts in the Nifty-50 Index, and this was how SGX Nifty came into existence. Investors—like most investors who are outside India—get the opportunity to trade Indian stock futures when the domestic market is closed, based on this theory. Therefore, foreign investors wanting to bet on demand in India received tremendous support.
Finally, the SGX has managed to make itself very useful as a lead indicator to investors of perhaps the future trends that may be going to happen in connection with Indian stock exchanges before their actual launch. Where it is Exchanged: Trades on the SGX NiftyAmong the key financial centers in Asia, it facilitates trading in various financial instruments, including options and futures. All these trades are safely done efficiently through a platform offered by the Singapore Exchange.
As it resides in Singapore, SGX is denominated in a different time zone from India and hence can get traded before Indian markets. It is due to this that it sets the tone for the Indian bourses once they open for business.
What does NIFTY stand for?
NIFTY is the most extensive stock market index of NSE. Companies that dominate trading on the NSE with their free-float market capitalizations form this index. Among all the indices, NIFTY50 is mainly used and traded by investors. It showcases the top 50 stocks traded on the NSE among 1600.
In this regard, NIFTY comes in handy to investors for tracking market trends, comparing returns on investment, and testing the economy at large.
It comprises stocks of companies from 12 sectors, including financial services, information technology, consumer goods, metals, pharmaceuticals, energy, and so on.
How does Nifty get calculated?
NIFTY is computed by float-adjusted and market capitalization-weighted methodology. This methodology postulates the market value of shares in a company that can be freely traded in the open market. The shares held by promoters, government, or other strategic investors are excluded from its computation.
The formula for the NIFTY calculation requires the previous adjustments to calculate the base year and value in advance. The base year and base value refer to an initial value given to the index to provide a starting point, so changes to the values then compare with that starting point over time. The base year is 1995, while the base value is 1,000 points.
How SGX Nifty and Nifty are Related?
SGX Nifty Today is a derivative of the Nifty index because it is traded on the Singapore stock exchange platform; thus, such trade sets a predetermined price for the share, making any investments caused by it sort of risk-free in the future.
First and foremost, you need to consider that just like India’s Nifty is traded upon this Indian stock exchange platform—NSE—and not anywhere else, SGX stands for the futures of Nifty in Singapore. As far as the share price was already decided, both buyer and seller had to promise to buy at that pre-decided price despite all changes in stock markets that may take place in the future.
Because the Singapore Stock Exchange is the leading exchange located within India, SGX nifty helps predict and observe the behavior of the Indian Nifty and hence plays a vital role in the Indian stock market.
What is the difference between SGX Nifty and Indian Nifty?
The difference between the SGX Nifty Today and the Indian Nifty is basically that while both of them indicate the leading stock indicator for the respective nations, the former represents a host market or a future trade platform in Singapore where the prices of a stock are predefined to avoid or reduce the risk associated with its fluctuation in the future. In contrast, the latter trades only on the Indian stock exchange platform known as NSE or National Stock Exchange.
Another critical difference is the contract size of the Indian nifty instead of the SGX nifty. In an Indian Nifty, the buyer and seller must have at least 75 shares, which is not the case in the SGX Nifty. This infers that SGX has no contract containing shares, while every Indian nifty has to have shares.
Factors Affecting SGX Nifty:
Economic Indicators of India: All economic indicators, be it the GDP growth, inflation, or industrial output, can also leave their impact on SGX prices. The positive data will mean high prices, while the negative will be for low prices regarding economic data.
Global market conditions: The global market conditions may also influence the price of the SGX Nifty. For instance, if there is a recession globally in the markets, this can result in lower prices for SGX Nifty.
Company news: Company-specific news, such as earnings reports or significant announcements, can influence the price of the Singapore Exchange. Positive news can do their part to drive prices higher, while negative news could do their part in pressing them lower.
How precisely does SGX Nifty impact the Indian Market?
It has immense potential to affect the Indian stock market because it indicates which level the Nifty 50 index will open at, much before doodle bugs come into action in India. As the SGX Nifty gets traded before the working hours of the Singapore market, it reflects the views of the market entities and thus helps make responses to trading decisions with utmost care. This sets a definite tone for India’s market and influences all early trading patterns. The movement of the SGX primarily aids intraday traders in deciding when to take short or long positions according to its movements. One has to remember that usually, the SGX Nifty is always more volatile than the NSE Nifty. As valuable a tool as the SGX Nifty can be, it should not be made the single predictor or indicator for the Indian stock market.
In this respect, any study must take other relevant factors into consideration if it is to recommend a comprehensive analysis.
Pros And Cons
Benefits by knowing SGX Nifty:
The investment by more foreign investors in the Indian Derivatives is attracted. The geographical proximity between India and Singapore ensures better connectivity between the two exchanges and less time lapse. It, therefore, serves as an excellent alternative to investors who otherwise do not have access to Indian markets, especially if they seek to transact in US Dollars.
Moreover, it provides much leverage in transactions, especially those relating to hedge funds, with extended hours of working on the SGX Nifty. It is observed that an extended time window of 16 hours makes market participants see Indian markets about overnight developments on Wall Street, sharpening their decision-making capacity.
Challenges and Limitations
Owing to global economic cycles and political events on the world scene, SGX Nifty is relatively more volatile than NSE Nifty. The Indian residents are not permitted to trade in the SGX contract. How does SGX Nifty Differ from NSE Nifty? The Indian stock market opens at 9:15 A.M. and closes at 3:30 P.M. So it has a window of six and a half hours to operate.
On the other hand, SGX Nifty runs from 6.30 a.m. to 11.30 p.m. IST for 16 hours every day on the Singapore Stock Exchange. Such a long trading period on the SGX helps get more advanced influence about the stocks traded in it concerning global happenings.
The traders also refer to the SGX Nifty futures for early decision-making as juxtaposed to the NSE Nifty.
Conclusion
Summary: In this blog, we discussed the SGX Nifty and its relationship with Nifty; it helps indicate the opening of the Indian stock market. We looked at what factors affect the movement of SGX and gave examples of its impact on the market.
Final Thoughts: Any aspiring investor in the Indian stock market must know what SGX Nifty is. Because this index gives some idea regarding the market opening, it does prepare investors and traders better to make the right decisions. If you track the movement of SGX Nifty, then you would be better prepared in advance against the market movements.