Growing disconnect between SGX Nifty & D-Street telling a story

By DK Aggarwal

There was a time when morning trade on Nifty futures on Singapore Exchange used to show the day ahead for Dalal Street. In recent times, that has become more of an exception than a norm.

More often than not, Nifty has looked totally disconnected with SGX Nifty futures, reflecting a certain decoupling between the two.

The difference between NSE and SGX (Singapore Exchange) is now well known to everyone on Dalal Street, and it has become an issue also for the foreign market players, mainly the hedge funds, trying to get exposure to Indian stock market.

Earlier many hedge funds, which did not want to register directly in India, used to trade in SGX Nifty for India exposure. Thats because India has a lot of compliance norms, tough tax rules and other roadblocks. Singapore is a hub of offshore trading for not only India, but many markets, including China, Japan and Indonesia.

Now, with most of SGXs India-focused products being halted, investors may either come to India directly or move to other emerging economies. The chances of the first option is better if India continues to attract investors, in which case these FIIs may be ready to bear the additional expenses and compliance costs to either seek direct registration or move to Gujarat International Finance-Tec (GIFT) City, a district in Gujarat state positioned by the Indian government as a global financial hub.

What went wrong? It all started with NSE announcing its withdrawal from a long-term agreement with SGX in line with a coordinated decision among the Indian bourses to pull back overseas futures on Indian indices.

SGX tried to fill the gap by launching a replica of Nifty futures, bypassing NSE. That led to a conflict and a 16-year-old mutually beneficial relationship soured drastically, with NSE dragging SGX to court.

The Bombay High Court has extended the arbitration deadline till December 31, 2020, for settling the dispute between NSE and SGX over the trading of Nifty products. To note, Nifty50 futures remain the third most actively traded derivative contracts on SGX after the FTSE China A50 Index futures and the MSCI Taiwan Index futures.

Now, market participants have taken sides in the wake of these developments. Even though NSE's existing licence has been extended, investors are unlikely to wait till the last moment to look for substitutes. TRead More – Source

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