Global Indices and SGX Nifty – What Indian Investors should know

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Think of a company X that manufactures car batteries. This company depends on the supply of certain chemicals that create the final product. Lead, for example, is an essential element for X, and if there is a prolonged heavy rainfall in the mines from where this chemical arrives, the company will face a raw material crisis. Consequently, the supply of car batteries from X will fall, and consumers might have to pay a higher price to the retailers to procure within the limited supply.

The above example illustrates that price of any commodity in the economy is tied to multiple variables. Price should never be seen in silos but within the context of various factors. Similarly, the price of listed companies in the share market is a play of domestic, national, and international influences that companies can’t ward off.

An investor can’t consider all such factors to make sense of the price fluctuations and future trends. Sometimes these factors can be spotted, but most of the times, it may be unfathomable. Thankfully, there are easier ways. Share Markets abound with data, and the analysts have devised indicators to gauge the current state of the market and the potential future trend. A Demat account gives access to all such rich data & alternatively, share market-centric websites display it extensively. Let’s view closely how the Indian share market connects with the global markets.

Global Indices

Consider the example of Nifty50. The value of the Nifty Index has been hovering between 15000 to near about 18000 in the year 2022 (Jan’22- Aug’22). Nifty is a notable indicator referenced by many investors to interpret the current state of the market and the possible future trend. Now, Nifty will not operate in silos as well. Nifty represents the top 50 businesses in India, all of which are impacted by the global cues. Therefore, an informed investor will not just see the Nifty, but also global indices to put the current levels into proper context. And hence, the levels of Dow Jones, NASDAQ, and Nikkei, for example, gather merit.

Indian stock market opens at 9 AM (pre-open session), and the early participants make their moves post-checking the global market movements. When the west market closes, the Indian market awakes, and the far-east Asian market wakes up earlier than the Indian market. An analyst watches what happened in the west (US, Europe) and what has picked up in east Asia (China, Japan, Singapore) and concocts a view of the Indian market.

SGX Nifty

If you follow market news, often the mention of SGX Nifty or Singapore Nifty will come across. SGX Nifty is a derivative contract of the Indian Nifty Index that is traded on the Singapore Stock Exchange. The value of SGX Nifty depends on the Nifty. What makes SGX Nifty unique is that it is traded from 6.30 AM till 11.30 PM according to India time, and therefore, it captures the global cues actively even when the Indian market is closed. As you will recall, the Nifty is traded between 9 AM till 3.30 PM Indian time.

While the Indian market closes at 3.30 PM, SGX Nifty continues to trade. Global events and the trickle-down effect get baked into SGX Nifty levels, and Indian Investors keep a close watch to assess the impact on Indian Market. Similarly, SGX Nifty starts trading from 6.30 AM India time, giving ample time to gauge the market sentiments before the Indian market opens at 9 AM.

Several traders and analysts reference the SGX Nifty levels to predict the opening levels for Indian markets. Intraday traders take a position in the opening session of Indian markets basis the SGX Nifty levels. Here are some facts about SGX Nifty Indian investors should know about:

• Foreign Investors can participate in trading SGX Nifty without registering with the Indian authorities
• Indian citizens cannot trade in SGX Nifty. It is available only for Foreign Portfolio Investors.
• NRI Indians can trade in SGX Nifty subject to the laws of derivative trading applicable in the country they are situated
• In Jul’22, Govt. of India announced that SGX Nifty will also be traded in the GIFT city, Gujarat
• SGX Nifty is dollar-denominated 

Conclusion

Shares traded on stock exchanges represent the businesses of companies, which are dependent on multiple variables spread across the globe. Since it is impossible to pin down individual variables, it’s prudent to follow the global indices and view markets in perspective. SGX Nifty is a pivotal benchmark to assess the Indian markets since it continues to trade even when the Indian market snoozes.