GIFT Nifty & SGX Nifty Correlation

1. Introduction
The Indian derivatives market has witnessed a historic transformation with the shift of offshore Nifty trading from SGX Nifty (Singapore Exchange) to GIFT Nifty (Gujarat International Finance Tec-City International Financial Services Centre). This move, significant in both strategic and geopolitical terms, was designed to bring liquidity, price discovery, and market influence back to Indian jurisdiction.

The relationship or correlation between GIFT Nifty and SGX Nifty is not just about numbers; it encapsulates the evolution of India’s financial markets, regulatory reforms, and global investor behavior. This guide explains the intricate correlation between the two, contextualized by market structure, trading dynamics, and macro-financial impacts.

2. Background of SGX Nifty
Before GIFT Nifty emerged, SGX Nifty was the go-to platform for global investors to gain exposure to Indian equity markets without being subject to Indian capital controls. Introduced in 2000 by the Singapore Exchange (SGX), SGX Nifty offered Nifty 50 index futures for global investors, especially hedge funds, proprietary traders, and institutional players who wanted to trade Indian indices in USD without directly accessing the NSE (National Stock Exchange) in India.

Key Points:

Cash-settled in USD.

Available for trading ~16 hours a day.

Offered strong liquidity and price discovery overnight.

Heavily used by global institutions for hedging Indian equity exposure.

3. Emergence of GIFT Nifty
GIFT Nifty was launched in 2023 on the NSE International Exchange (NSE IX) at GIFT City (Gujarat International Finance Tec-City) as a replacement for SGX Nifty, aiming to:

Localize Nifty trading.

Bring offshore volumes back to India.

Provide tax-efficient and regulated access to foreign investors.

GIFT Nifty is the sole platform for trading international Nifty derivatives post-transition, and it is denominated in USD, keeping global appeal intact.

4. Timeline: Transition from SGX Nifty to GIFT Nifty
Important Milestones:
2018: NSE terminated its data-sharing agreement with SGX, sparking a legal and market debate.

2019–2021: Regulatory developments and infrastructure improvements at GIFT City.

July 3, 2023: Official transition from SGX Nifty to GIFT Nifty. SGX stopped offering Nifty futures.

GIFT Nifty now operates under NSE IFSC regulations and continues to serve the same investor base with enhanced Indian regulatory control.

5. Structure and Functioning: SGX vs GIFT Nifty
Feature SGX Nifty GIFT Nifty
Exchange Singapore Exchange (SGX) NSE International Exchange (NSE IX)
Currency USD USD
Underlying Index Nifty 50 Nifty 50
Settlement Cash-settled Cash-settled
Regulation MAS (Singapore) IFSCA (India)
Time Zone Singapore Time (SGT) Indian Standard Time (IST)
Taxation Singapore tax regime IFSC-friendly tax structure

While the structure is mostly similar, the jurisdiction and oversight shifted from Singapore to India.

6. Trading Hours Comparison
Exchange Trading Hours (IST)
SGX Nifty (old) 06:30 AM – 11:30 PM IST (approx)
GIFT Nifty 6:30 AM – 3:40 PM (Session 1)

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**4:35 PM – 2:45 AM** (Session 2) |
GIFT Nifty provides almost 21 hours of trading — covering both Asian and U.S. market hours, similar to SGX Nifty — ensuring that international investors can continue trading Nifty seamlessly.

7. Price Discovery and Global Influence
SGX Nifty's Role:
SGX Nifty was often viewed as the early indicator for Nifty 50 due to its early start.

It reflected overnight global cues (US, Asian markets).

It had strong influence over NSE opening gaps.

GIFT Nifty's Continuity:
Now assumes SGX Nifty’s role in overnight price discovery.

GIFT Nifty trading between 4:35 PM and 2:45 AM IST captures US and Europe market reactions.

Acts as a lead indicator for Nifty’s direction in the Indian market.

Thus, the correlation pattern of market impact continues, just the platform has shifted.

8. Liquidity and Volume Shifts
Pre-Transition:
SGX Nifty volumes averaged USD 1–1.5 billion/day.

Liquidity was concentrated in Singapore due to ease of access.

Post-Transition:
GIFT Nifty quickly absorbed liquidity, crossing $1 billion in daily turnover within weeks of launch.

Leading global market makers and brokers now operate from GIFT City.

Trading is supported by IFSCA-approved entities and clearing corporations like NSE IFSC Clearing Corporation.

The liquidity correlation was maintained as investors smoothly moved to GIFT Nifty.

9. Institutional Participation and Derivative Strategies
Institutional investors still require Nifty derivatives to hedge equity portfolios.

GIFT Nifty options and futures offer equivalent utility as SGX Nifty did.

Hedge funds, FPIs, global trading desks have migrated their Nifty-linked strategies to GIFT City.

Because GIFT Nifty is cash-settled and USD-denominated, hedging and arbitrage strategies remain unaffected.

Correlation in terms of usage and derivative structuring remains intact.

10. Impact on Indian Traders
Retail Indian traders are not directly impacted because both SGX and GIFT Nifty were/are offshore products.

However, GIFT Nifty can be tracked through price feeds and platforms like NSE IFSC, Refinitiv, Bloomberg, etc.

Indian traders still monitor GIFT Nifty early morning to assess gap-up/gap-down expectations.

So, GIFT Nifty remains a sentiment barometer, just like SGX Nifty was.

Conclusion
The GIFT Nifty-SGX Nifty correlation is best described as a seamless transition of purpose, structure, and function from one platform to another — with jurisdiction and regulatory benefits tilting in India's favor. While SGX Nifty served global investors well for over two decades, GIFT Nifty now fulfills the same role with greater regulatory sovereignty, tax efficiency, and strategic national interest.

Key takeaway:

SGX Nifty and GIFT Nifty are fundamentally correlated in utility and influence — but GIFT Nifty is the future.