What Is GIFT Nifty? Meaning, Timings, and How It Affects Indian Markets

Ever experienced those mornings when you get up, take your phone, and before you make your tea, you are already checking the opening of the Indian stock market?

For a long time, the important hint, which was the best part of early morning, was being taken from a distant place, Singapore to be precise, and something called the SGX Nifty.

It was like possessing a crystal ball, through which we could see how the Indian Nifty 50 would perform when the market eventually opened for trading.

But guess what? The crystal ball has shifted its position! In a very thrilling turn of events in Indian finance, that essential morning signal has left its place and literally moved to Gujarat. We now call it GIFT Nifty.

Why is it called GIFT Nifty? What caused the shift? And how does this major transition affect our markets and possibly your investments as well? Let’s decode it!

Understanding GIFT Nifty: The New Home for India’s Global Ambitions

To start, let’s first understand what GIFT actually is. India, as a country, has made a huge investment in a state-of-the-art, international financial market – the Gujarat International Finance Tec-City, or GIFT City.

It is equipped with all the facilities and amenities to cater to the needs of international investors and professionals. India's first International Financial Services Centre (IFSC), which in turn is the reason for the country's monetary and talent attraction.

GIFT Nifty is a special financial product that lets global investors take positions on the Nifty 50.The Nifty 50 remains unchanged from the previous ones we have been familiar with, but it has shifted to a different international exchange known as NSE IX (which stands for the NSE International Exchange), where it is traded in US Dollars instead of Indian Rupees.

Before GIFT Nifty, SGX Nifty (Singapore Exchange Nifty) was the main platform for global investors to trade on the Nifty 50. It was popular among foreign investors because of its trading time zones and no currency conversion hassles. Now, this activity has shifted to India through GIFT City, bringing international market participation directly onto Indian soil.

Features of GIFT Nifty

1. Dollars Instead of Rupees for Trading

Let's say you are a London-based investor. You are looking to invest in Indian markets, but don't want to go through a tedious process of making constant conversions between Pounds, Rupees, and Dollars. GIFT Nifty is the solution for this! For example, overseas participants do not need to manage frequent currency conversions between their local currency, the Rupee, and the Dollar. Using a globally accepted currency makes Indian market derivatives more accessible, efficient, and investor friendly.

2. Longer Trading Hours

The Indian equity market operates for approximately six hours a day, from 9:15 AM to 3:30 PM IST.

GIFT Nifty offers a much longer trading window. It is available for trading for nearly 21 hours a day, covering major global market sessions. This enables investors across Asia, Europe, and North America to trade Indian derivatives conveniently during their respective business hours. Let’s take a look at the timings quickly:

3. A Strategic Home in GIFT City

GIFT City is more than a location; it is an idea. It is an international financial centre that is situated in India, but it is governed by the IFSCA's (International Financial Services Centre Authority) special rules and regulations. The benefits of the special status are in the form of tax incentives and a simplified regulatory framework, which makes it very attractive to global businesses and investors.

How does GIFT Nifty Benefit Investors?

Transferring the market pulse from Singapore to Gujarat is not only a change of location; it is a huge enhancement for India's financial reputation. Here is why GIFT Nifty is important for you:

• The Early Warning System: As it opens at 6:30 AM IST, it will be able to seize the global reactions to overnight news. It is like a weather forecast which tells you if Nifty 50 is about to open with a Gap Up or Gap Down even before India’s bell rings.

• Dollar-Driven Convenience: Trading in US Dollars (USD) eliminates currency risk for the overseas investors. They will not be concerned about the Rupee’s fluctuations while the investments are still in their favour.

• Tax Advantages: It is situated in the GIFT City IFSC, which is a tax-friendly paradise. For foreign investors who meet the requirements, there is no STT (Securities Transaction Tax), no GST and no Capital Gains tax.

• 21-Hour Trading Window: GIFT Nifty is always on just like the markets. Almost 21 hours of trading allows the investors to respond to global events (like a US Fed meeting) in real-time, not waiting till the 9:15 AM opening.

• Bringing the Big Money Home: The transfer of liquidity from the SGX Nifty to the NSE IX has resulted in India centralizing billion dollars’ worth of trading, and thus a deeper and more stable market is created for everyone involved.

How to Trade GIFT Nifty: Is it for Everyone?

Now comes the most important question: whether you can trade GIFT Nifty as a regular retail investor in India? The very short answer to this is that a resident Indian cannot trade the GIFT Nifty directly.

1. For the Global Players: GIFT Nifty was made mostly for the Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), and other foreign entities that are eligible to participate. These players can open trading accounts at brokers in GIFT City that are registered with the International Financial Services Centres Authority (IFSCA) and directly trade on the NSE IX.
2. The Setup: To open an account, there is a specific onboarding process that is very similar to the one for a regular trading account, compliant with international standards and regulations.
3. Settlement: Normally, they settle on trade T+1 or such processes. This means that, between the next working day, these transactions are tagged cleared codes.

Thus, even though you cannot directly trade GIFT Nifty from your local Demat account, it still gives you an understanding of domestic market movements, which can be valuable for understanding market reactions.

Risks Associated with GIFT Nifty

Every financial product has some considerations and risks, and GIFT Nifty is no exception:

1. Volatility: GIFT Nifty trades for long hours across different global time zones, so it reacts quickly to major international news. For example, if US inflation data is released at night, GIFT Nifty can move immediately. This may lead to large gaps when the Indian market opens the next day. While this makes it exciting, it also means investors must stay closely updated on global developments.

2. Leverage Magnifies Everything: Derivative contracts are leveraged instruments. This means that with a small capital, you can control a large value (your margin). This can increase your profits but also your losses to the same extent. It's a powerful instrument, but it requires meticulous handling.

3. Liquidity in the quiet hours: Even if the market is open for 21 hours, liquidity (the ease of buying or selling without affecting the price significantly) may be less during the very late-night or early-morning hours when the major markets are closed. As a result, there might be slightly wider bid-ask spreads, which means that you may have to pay a little more or sell for a little less.

References:

• Angel One: What is GIFT Nifty? Meaning & Timings
  
• NSE International Exchange (NSE IX): Product Specifications
  
• Kotak Securities: Impact of GIFT Nifty on Indian Markets
  
• IFSCA: Overview of GIFT City
  
• The Economic Times: SGX Nifty to GIFT Nifty Transition