The National Stock Exchange’s (NSE) flagship index, the Nifty futures contracts on Singapore Exchange (SGX) will be launched for trading at the Gujarat International Finance Technology (GIFT) city in Gandhinagar.
Prime Minister Narendra Modi will launch this dollar-denomination Nifty futures contract and also inaugurate the India International Bullion Exchange (IIBX).
It has been observed that traditionally, due to foreign portfolio investors’ (FPIs) increased preference for dollar-denominated products and a favourable taxation clause, traders preferred to trade NIFTY on the SGX rather than in India.
In 2021, SGX Nifty’s daily trading volume was about 80 per cent more than India’s NSE. An Economic Times report outlined that Nifty Futures' volume on NSE was Rs 14,500 crore in 2021 and in SGX Nifty Futures' volume was Rs 26,000.
Nifty futures is the NSE NIFTY 50 futures contract, and it is composed of 50 top Indian stocks periodically classified by NSE.
What Will Happen Now?
Mainly FPIs and foreigners who traded in dollar-denominated SGX Nifty futures contracts, can now continue to do so on a lower tax scale and in India’s International Financial Service Centre (IFSC) in Gandhinagar, Gujarat.
“It’s a soft launch of SGX Nifty futures on the GIFT-IFSC,” the Economic Times quoted a source as saying.
He said that for the first few months, SGX Nifty futures will be traded simultaneously both in India (Gandhinagar GIFT IFSC) and Singapore (SGX). Later after all the other issues (if any) are ironed out, SGX will discontinue the trading of Nifty in Singapore, and shift permanently to Gandhinagar GIFT IFSC only.
What Is The Taxation Aspect For This?
The NSE SGX Nifty product is strictly for foreigners, and hence to favour them, the taxation rules have been relaxed.
Kamlesh Shah, president of the Association of National Exchange Members of India (ANMI) said in an interview to the Economic Times that trading at Gift City will provide various benefits to foreign investors, especially in taxation matters, where they would enjoy a minimum alternative tax (MAT) of 9 per cent, as well as exemptions on stamp duty, GST, STT and CTT too.
“Those trading at Gift City will see the value additions in terms of low operating cost and tax benefits for operating their business from IFSC entity in comparison to the cost of setting up offices in foreign countries like Dubai and Singapore,” he added.
What Used To Happen Earlier For Nifty On SGX?
The NSE Nifty futures contracts on the Singapore Stock Exchange used to be traded till 2018 in Singapore, but then due to disparity and NSE’s concern of trading activity migrating from India to Singapore due to this arrangement, it had terminated its licensing pact with SGX. Then, SGX sued NSE, and it was only in 2020 that both parties dropped the suit and went into an arbitration and connectivity pact to re-introduce this arrangement, but in GIFT City.
What Is IIBX?
Apart from the launch of SGX Nifty in Gandhinagar, GIFT IFSC city, PM Modi will also inaugurate the India International Bullion Exchange (IIBX). The IIBX is jointly owned by NSE, Multi Commodity Exchange (MCX), India INX International Exchange, National Securities Depository (NSDL) and Central Depository Services (CDSL).
So far about 60 qualified jewellers have signed up for IIBX and more are expected to on-board soon.
