Nifty futures trading shifting back to India
Share of Nifty futures open interest on Singapore Exchange falls as the government of India softens stance on GAAR
Foreign investors, who had shifted their trading positions to Singapore due to taxation-related concerns, have started returning to Indian shores.
The Nifty Futures open interest (OI), or the number of active trading positions, in July was just five per cent higher on the Singapore Exchange (SGX) compared to that on the National Stock Exchange (NSE). Average Nifty Futures OI for the last month on SGX was 47 per cent more than at NSE, data compiled by the BS Research Bureau show.
The government softening it’s stance on the General Anti-Avoidance Rules (GAAR) has helped calm the nerves of anxious foreign investors, say experts. The Centre has decided to defer the implementation of GAAR to the next financial year and has also decided to set up an expert committee to lay down a road map for its implementation.
Nifty Futures open interest in July was just 5% higher on SGX
Nifty Futures open interest (OI)
|SGX||NSE||Difference (in %)|
|Note: SGX and NSE contract size adjusted for comparison
Compiled by BS Research Bureau Source: Bloomberg
“Open interest on NSE in July saw a sharp rebound from the previous month, when it had hit a seven-year low, as GAAR related concerns have abated. Open interest on SGX has not come off sharply but domestic positions have gone up,” said Yogesh Radke, head of quantitative research at Edelweiss.
“Ideally, foreign investors prefer taking positions domestically as NSE provides deeper liquidity and diversified classes of investors, which gives more opportunities for trading. But some FIIs were forced to bet through Singapore due to tax concerns,” said a derivatives head with a foreign brokerage, who did not want to be named.
After the controversial Budget proposal on retrospective taxation and GAAR, foreign institutional investors (FIIs) had increasingly started betting on the Indian markets from Singapore.
As a result, Nifty Futures OI, or the number of open trading positions, on SGX was nearly 50 per cent higher than that on Nifty in June. On some days, the total built-up positions on the Singapore bourse was as much as 80 per cent higher than on the NSE.
For the sake of comparison, the contract sizes on both exchanges were adjusted for value. One Nifty futures contract on SGX is worth $2 multiplied by the index value, while that on the NSE is worth 50 multiplied by the index value.
The contracts of India’s bellwether Nifty Futures index along with the NSE are traded on the SGX in Singapore and the Chicago Mercantile Exchange in USA. The contracts traded on the SGX are popular among FIIs due to lower transaction costs and tax, along with favourable long trading hours.
The SGX is used by FIIs more for positional bets than actual and less of intra-day trading. This reflects in the low trading turnover. Though the SGX has high OI, the actual trading turnover is only a fraction of that on the NSE.
However, Nifty futures trading on the SGX will continue to remain in demand as it has its own advantages, say experts.
“SGX Nifty Futures will have its fair share of trades from FIIs on the back of its inherit benefits like lower transaction costs, dollar denominated contracts and lower taxes,” said Radke.
Source: Business Standard
Search Our Archives
- Stocks Trading above their 50 day moving average - DMA In Stock Research
- Download free Ebooks based on Technical Analysis In Personal Training
- TOP 100 Stocks with the Highest P/E as on July 14th, 2013 In Stock Research
- TOP 100 Stocks with the Lowest P/E as on July 14th, 2013 In Stock Research
- Charting Pathsala - Your guide to Techincals In Technical Analysis
- karthik hi can we enter tata motors at cmp...In Intraday calls for 24-07-14
- your chela hi cb sir what your view in cairn ind...In Intraday calls for 24-07-14
- prathima Hi cb sir , what is the target for si...In Intraday calls for 24-07-14
- TradeWarrior TradeWarrior, Book Profit on Nifty...In Intraday calls for 24-07-14
- PINTU GM Sir Any small (within Rs. 200)in...In Intraday calls for 24-07-14
- naina hi TRADEWARRIOR, holding west coast p...In Intraday calls for 24-07-14
- NISHA Hi CB, I am holding Aban 10 @803 .Wh...In Intraday calls for 24-07-14
- trade 4 PROFITS Hi ALL, My Today’s 1st call (for ...In Intraday calls for 24-07-14
- Som Good Morning CB! Can i buy TATASTEEL 5...In Intraday calls for 24-07-14
- prashant I bought 2 lots of lupin 1060 put at 2...In Intraday calls for 24-07-14
- sanzy CB sir, your view on ICICI Bank.. ...In Intraday calls for 24-07-14
- TradeWarrior Buy NIFTY 31-Jul-2014 PE 7900 @ 136 |...In Intraday calls for 24-07-14
- karthick CB can we short thomas cook?...In Intraday calls for 24-07-14