GIFT Nifty

What is GIFT Nifty?

GIFT Nifty is a US dollar-denominated futures and options contract linked to the NIFTY 50 index, traded on the NSE International Exchange (NSE IX) in GIFT City, Gandhinagar, Gujarat. GIFT Nifty replaced SGX Nifty, an offshore Nifty derivative product previously traded on the Singapore Exchange with effect from 3 July 2023, following a connectivity agreement between NSE and the Singapore Exchange (SGX) signed in July 2022.

Why is GIFT Nifty important?

GIFT Nifty is often the first thing traders check when global markets have moved overnight. Since the contract starts trading before the Indian market opens, its direction is used as an early reference for how the NIFTY 50 may react at the opening bell. Its role has become more prominent after offshore Nifty trading shifted from SGX Nifty to GIFT City, Gandhinagar.

Why do market participants follow it?

• Overnight changes in GIFT Nifty can influence the Indian stock market.
• Foreign investors use it to track Indian market sentiment from outside India.
• For many market participants, this is now the first offshore contract they look at for Nifty-related futures activity.
• It also gives a way to see whether offshore prices are moving differently from domestic market levels.

Key Features of GIFT Nifty

One of the distinguishing aspects of GIFT Nifty is the way it is structured for international participation while staying linked to Indian market benchmarks. GIFT Nifty is a derivatives contract that follows the movement of NIFTY 50, but its trading and settlement framework is designed differently from domestic index derivatives.

Its key features are:

• Trading takes place on the NSE International Exchange rather than on domestic exchanges.
  
• Settlement happens in US Dollars and not in Indian Rupees.
  
• Multiple contract cycles are available at any given time.
  
• Trading runs in two sessions, allowing participation across Asian, European, and US time zones.
  

How Does GIFT Nifty Work?

GIFT Nifty is a derivatives contract whose value moves according to expectations around the future levels of NIFTY 50. Instead of buying the actual stocks that make up the index, participants trade contracts based on whether they expect the benchmark to rise or fall by expiry. The contract prices are subject to continuous change as global news, overseas markets, and currency movement influence sentiment.

It is designed for international market participants, including foreign portfolio investors, overseas institutions, and non-resident Indians trading through IFSC-registered or SEBI-approved channels. Resident Indian retail investors generally cannot trade it directly. Access may be available through specific IFSC brokers and may be subject to RBI’s Liberalised Remittance Scheme (LRS) rules. Hence, within India, GIFT Nifty is mostly followed as an early market indicator.

A GIFT Nifty contract functions as below:

• Buying and selling activity determines price movement through the session.
  
• Each contract reflects the expected future value of the Nifty 50.
  
• Global market developments often affect price movement first.
  

GIFT Nifty Contract Details

Like any futures product, GIFT Nifty trades with fixed contract specifications. These define how the contract is priced, settled, and carried till expiry.

Source: NSE IX

GIFT Nifty Timings

GIFT Nifty trades for nearly 21 hours a day across two sessions, providing investors and traders with an extended window to track global market movements and react to international developments beyond regular Indian market hours.

Session 1: 6:30 AM to 3:40 PM IST: The first trading session runs from 6:30 AM to 3:40 PM IST, covering key Asian and Indian market hours.

Settlement Break: 3:40 PM to 4:35 PM IST: A 55-minute settlement break occurs between the two trading sessions. Trading is paused from 3:40 PM to 4:35 PM IST during this period.

Session 2: 4:35 PM to 2:45 AM IST (next day): The second trading session begins at 4:35 PM IST and continues until 2:45 AM IST the next day, covering major European and US market hours.

The extended trading schedule allows market participants to monitor global cues and assess their potential impact on Indian markets before the regular NSE trading session begins.

SGX Nifty vs GIFT Nifty: What is the Difference?

SGX Nifty and GIFT Nifty are offshore futures contracts linked to the NIFTY 50 Index, providing global investors with exposure to the Indian equity market beyond regular Indian market hours. The key difference is where the contracts are traded. SGX Nifty was traded on the Singapore Exchange (SGX), while GIFT Nifty is traded on the NSE International Exchange (NSE IX) at GIFT City, Gandhinagar, Gujarat.

Following the end of the NSE-SGX arrangement, trading in NIFTY-linked offshore derivatives was shifted to GIFT City. GIFT Nifty replaced SGX Nifty in July 2023, marking the transition of India's offshore NIFTY derivatives market to India's International Financial Services Centre (IFSC).

GIFT Nifty vs Nifty 50

Although both move around the same benchmark, they are not the same market instrument. While NIFTY 50 shows the live value of 50 large, listed companies on the domestic market, GIFT Nifty reflects the price of futures contracts based on NIFTY 50’s movements.

Factors Affecting GIFT Nifty Movement

GIFT Nifty does not move in isolation. Since trading continues across long hours, its direction can change several times before Indian markets open, depending on what unfolds globally.

Factors that influence GIFT Nifty’s movement:

• Interest rate signals from the Federal Reserve System often have an immediate effect on futures sentiment.
• A sharp overnight move in US markets usually carries into early offshore pricing.
• On days when crude oil rises quickly, inflation concerns can affect market direction.
• The rupee-dollar exchange rate also becomes important when currency markets are volatile.
• Political or military developments abroad can unsettle risk-taking.
• US inflation numbers and employment data are the figures traders watch closely.

Impact Of GIFT Nifty On The Indian Stock Market

The launch of GIFT Nifty shifted offshore Nifty trading closer to India by moving activity from SGX Nifty to GIFT City. This has added depth to India’s international market infrastructure and strengthened the role of domestic exchanges in global price discovery linked to Indian equities.

Its impact is visible in a few ways:

• Offshore trading linked to the NIFTY 50 now takes place under India’s own regulatory framework.
• More international trading activity is routed through GIFT City instead of overseas exchanges.
• It supports longer trading visibility for Indian market-linked products.
• The shift has also added to India’s efforts to build GIFT City as a financial hub.
• Routing international derivative transactions through GIFT City helps India retain a larger share of trading activity within the country.

GIFT Nifty Implied Nifty 50 Opening

GIFT Nifty can be used to estimate the potential opening level of the Nifty 50 by calculating the difference between the current GIFT Nifty level in the morning and previous Nifty 50 closing price.

A simplified calculation is: Implied Nifty 50 Opening = Previous Nifty 50 Close + GIFT Nifty Change

For example, if the previous Nifty 50 close was 25,000 and GIFT Nifty is trading +150 points, the implied opening indication would be approximately:

25,000 + 150 = 25,150

This is only an indication and not a guaranteed opening price.

The actual Nifty 50 opening may differ because of changes in global markets, domestic news, pre-open orders, stock-specific developments and other factors.

How to Trade in GIFT Nifty?

Eligible investors can trade in GIFT Nifty by opening an account with a broker registered on the NSE International Exchange (NSE IX) in GIFT City, Gujarat.

Step-by-Step Process:

• Open an account with a NSE IX-Registered Broker.
  
• Complete the required KYC and International Trading documentation.
  
• Fund your acount in US Dollars and Choose the contract month and place a futures or options order linked to the NIFTY 50 along with the desired expiry.
  
• Monitor the position until expiry or close it before settlement.