From the Viewsroom

Splitting the market

Lokeshwarri S K | Updated on January 20, 2018 Published on March 24, 2016


Trading Indian sector indices in overseas exchanges is bad

The recent move by the National Stock Exchange to list four sector indices on the Singapore Stock Exchange is a little surprising. When the Centre is trying to form an international trading centre in the GIFT city of Gujarat, floating additional instruments based on Indian stocks in Singapore can prove counter-productive. The GIFT City will be competing with other global financial centres such as Singapore and Dubai for business.

The Centre and regulators are, however, dragging their feet in deciding on tax incentives to be offered for those trading from and setting shop in the GIFT city. One of the stated objectives for setting up the GIFT City was to attract foreign investors trading in Indian index futures and options in offshore trading centres to India. Against this back-drop, making available four new futures based on sector indices — SGX Nifty Bank Index Futures, SGX Nifty IT Index Futures, SGX Nifty CPSE Index Futures and SGX Nifty midcap 50 Index Futures — for trading on the Singapore stock exchange makes little sense.

Availability of more options for taking a trading call on India can make many foreign investors shift to Singapore. India is in vogue overseas. In the equity index futures segment, SGX Nifty records the third highest volume in number of contracts, trading roughly 1.5 billion contracts every month. Besides this, Nifty index options traded on the SGX records the second highest turnover in this segment. We are giving foreign investors an incentive to stay on that exchange. Besides Nifty trades, now the trading on these four sector indices will be split between India and Singapore. The trades taking place on the SGX also tend to impact the opening price of the underlying contracts in India. Do we want to do that?

Lokeshwarri S K Senior Deputy Editor and Head of Research

Published on March 24, 2016
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