What is GIFT Nifty in the Indian Share Market?

Key Takeaways

• GIFT Nifty is a market sentiment indicator. It gives an idea of the NSE’s Nifty 50 opening tick before the live session starts.

• GIFT Nifty replaces SGX Nifty, offshore trading returns to NSE IX, GIFT City, Gujarat, India.

• These derivatives are traded in US dollars, making them accessible to global investors.

Introduction to GIFT Nifty

The Indian share market has evolved rapidly over the years, introducing new derivative contracts and greater global integration. One such important development is GIFT (Gujarat International Finance Tec-City) Nifty, which has replaced the SGX (Singapore Exchange) Nifty index as the key offshore derivative indicator for the Nifty 50.

For traders and investors, understanding GIFT Nifty is crucial because it gives early signals about the Indian market opening. It also reflects overnight developments in the global markets and overall sentiment toward the Indian stock market.

In this article, we will discuss everything you need to know about GIFT Nifty, including how it works, its timings, the difference between Nifty 50 and GIFT Nifty, and how traders use it.

What is GIFT Nifty?

GIFT Nifty is a derivative contract whose underlying asset is the Nifty 50. It is traded on the NSE International Exchange (NSE IX) located in GIFT City, Gujarat, India.

Earlier, Nifty derivatives contracts were traded on the Singapore Exchange as SGX Nifty. However, to bring this trading activity back to India, the National Stock Exchange (NSE) shifted these contracts to GIFT City and rebranded them as GIFT Nifty.

GIFT Nifty is majorly traded by global investors, and transactions are conducted in US dollars. Indian retail traders cannot directly participate in GIFT Nifty derivatives due to regulatory constraints.

However, Indian investors can access GIFT Nifty trading through the Liberalised Remittance Scheme (LRS). This is subject to various limits and compliance regulations, making participation less convenient and almost restricted.

What is NSE IX?

The full form of NSE IX is NSE International Exchange. It is one of the first international exchanges set up at GIFT City. This exchange allows global investors to trade in Indian equity derivatives in foreign currency, mainly US dollars.

What is GIFT City?

GIFT City stands for Gujarat International Finance Tec-City. It is India’s first International Financial Services Centre (IFSC), made to compete with global financial hubs like Singapore, Dubai, and London.

It provides tax benefits, regulatory ease, and infrastructure to attract global capital.

How Does GIFT Nifty Work?

The GIFT Nifty index works similarly to other indices but is specifically designed for global investors. Its value is derived from the underlying NSE’s benchmark Nifty 50 index, which is a basket of India’s top 50 companies.

GIFT Nifty is traded in US dollars instead of Indian rupees, which makes it unique and more accessible to global investors. As a derivative product, it offers contracts with multiple expiries, including monthly and quarterly options.

Another important feature of GIFT Nifty is its extended trading window. GIFT Nifty trades 21 hours a day, divided into two trading sessions: morning and evening.

The price of GIFT Nifty is not only influenced by domestic factors but also by global markets and news. Due to extended trading hours and intersection with global markets, GIFT Nifty often provides early signals of how the Nifty 50 may open in the Indian markets.

Timings of GIFT Nifty vs Nifty 50

GIFT Nifty timings are different from the Indian Nifty 50. It trades for 21 hours a day in two trading sessions. Whereas the Nifty 50 trades for just 6 hours and 15 minutes a day.

GIFT Nifty starts trading before Indian markets open and continues after Indian markets close. This extended session allows traders to track global sentiment.

Difference Between GIFT Nifty and SGX Nifty

The GIFT Nifty replaced SGX Nifty on July 3, 2023. The transition involved migrating $7.5 worth of derivatives contracts from Singapore Exchange to NSE IX in GIFT City, Gujarat, India.

The table below shows the comparison between Gift Nifty and SGX Nifty.

Difference Between GIFT Nifty and Nifty 50

GIFT Nifty and Nifty 50 both are different. Here is a table to help you understand the differences.

What Does GIFT Nifty Indicate?

For Indian traders and investors, GIFT Nifty is a widely used market sentiment indicator. It helps indicate the expected opening direction of the Nifty 50, global investors' sentiment toward equities, and captures reactions to overnight developments.

If the GIFT Nifty is trading 100 points higher before the Indian market opens, it indicates that the Nifty 50 index may open with a gap-up.

Similarly, if the GIFT Nifty is down by 100 points, it indicates the Nifty 50 index may open with a gap-down.

However, these are only indications; nothing is guaranteed; actual market movements can be different due to domestic factors and real-time market conditions.

Who Can Trade in GIFT Nifty?

GIFT Nifty is mainly for international investors, but access depends on regulatory frameworks.

Eligible participants are:

• Foreign Institutional Investors
• Global Hedge Funds
• Non-resident Indians
• Institutional investors
• Proprietary trading firms

Can Indian retail traders trade in the GIFT Nifty?

Indian residents cannot directly trade in the GIFT Nifty unless they have opened an account with an IFSC-registered broker. They also need to comply with the RBI’s Liberalised Remittance Rules.

Therefore, most retail traders use the GIFT Nifty as a reference tool for trading in Nifty 50 derivatives.

How does GIFT Nifty Benifits Indian Traders and Investors?

Tracking GIFT Nifty has multiple advantages for Indian traders and investors:

• Early signals of market opening:

Investors and traders get an early signal of the market opening ticks. It helps traders to adjust their strategies accordingly and avoid shocks after the opening bell.

• Align with Global News:

Since GIFT Nifty trades for long hours, most of the global news is factored in. Indian traders and inventors know how the market reacted to global news.

• Plan Intraday Strategies:

By looking into GIFT Nifty, traders can plan intraday trading strategies.

• Gap Up and Gap Down Indicator:

If GIFT Nifty is up by 100 or 200 points, it indicates gap-up opening and bullish market sentiment. However, if GIFT Nifty is down by 200 points, it indicates a gap-down opening and bearish market sentiment.