Market Updates SGX's India equity futures hit records in July

07 August 2017

Market Updates

SGX’s India equity futures hit records in July

• Improving investor sentiment, strong economic fundamentals and increased foreign investment flows signals a promising outlook for India.

• Increased investor interest in India has helped to drive SGX’s India equity futures to new records as the Nifty 50 Index and Nifty Bank Index broke historical high in July.

• SGX Nifty 50 Index Futures reported the highest monthly total volume and open interest so far this year in July of 1.87 million contracts and 416,569 lots respectively.

• SGX Nifty Bank Index Futures hit single day record volume of 6,089 lots and open interest of 2,701 lots in July.

India in the spotlight

According to the IMF’s World Economic Outlook (WEO) Update released on 24 July, India is projected to grow faster than any other country in the world, with an expected growth rate at 7.2% for 2017, surpassing the forecast for China of 6.7% and emerging market economies of 4.6%. The IMF expects this to accelerate to 7.7% in 2018.

India’s economy is largely driven by strong economic fundamentals, strong fiscal consolidation and the Indian government’s progress in structural and economic reforms. The acceleration of structural reform is bringing in new growth impetus. July saw the implementation of India’s most significant tax reform, the introduction of a Goods and Service Tax (GST), replacing multiple indirect taxes with a uniform rate across India, This is expected to enhance efficiency of the production and movement of goods and services across the country and prove to be positive for economic growth,

India’s positive macroeconomic drivers continue to draw foreign investment flows. The net outflows in Foreign Portfolio Investment (FPI) between October 2016 and January 2017 began to reverse from February 2017, since when it has recorded consistent monthly net inflows. Between January to July 2017, total FPI net inflow amounted to US$28 billion, a six-fold increase compared to the same period last year.

Nifty indices rallied to a historical high

Riding on the tailwind of India’s positive macroeconomic outlook, the Nifty 50 Index crossed the 10,000 index historic mark on 26 July 2017, with constituent stocks HDFC Bank and Reliance Industries Ltd contributing to most of the advance. The year-to-date return for the Nifty 50 index stood at 31.1%, surpassing all other key Asian emerging market benchmark indices.

The Nifty Bank Index, the third best performer among the Nifty sector indices, hit a record high of 25,103.65 on 31 July, driven by the two index heavyweights, HDFC Bank and ICICI Bank. Since the start of 2017, the Nifty Bank Index has outperformed the broader market Nifty 50 Index, raising the investors’ attention to India’s banking sector.

New records for SGX Nifty Futures Suite

12348. Nifty 50 Index Futures saw strong trading in July. Monthly volume of SGX Nifty 50 Index Futures grew 28% from January 2017 to 1,870,408 contracts, the highest monthly volume achieved this year. Open interest rose 26% from January to 416,569 contracts (or US$8.4 billion in notional value) on the back of strong institutional investor participation.

SGX Nifty Bank Index futures has also gained strong traction in the recent months. Month-end open interest reached a record high of 2,701 lots on 31 July, representing a 6-fold month-on-month increase. Volume also grew to a new high of 6,089 contacts on 27 July, and a total of 67,931 lots (US$1.7 billion in notional value) were traded during the month.

Chart 3: Volume and open interest growth for SGX Nifty 50 Index Futures

Chart 4: Six-fold surge in open interest of SGX Nifty Bank Index Futures in July

SGX Nifty Index Futures is the most liquid offshore Nifty 50 Futures contract, accounting for 54% volume market share and 70% open interest market share of the Nifty 50 Index Futures universe. Meanwhile, SGX Nifty Bank Index Futures is the only such futures contract listed out of India, offering international investors access to India’s banking sector. SGX continues to lead globally as the premier venue for providing offshore access to India with its cross margining capability across its India equity and FX futures, as well as other equity futures. SGX Nifty Index Futures is also CFTC certified for access by US investors.

Table 1: Contract Specifications of SGX Nifty Futures Suite

Table 2: Cross-Product Margin Offsets

Source: SGX, 1 Aug 2017

With over 19 hours of trading across major time zones, global investors are able to make use of both the regular T session which runs from 9.00am to 6.15pm (Singapore time), and the T+1 session which runs from 6.40pm to 4.45am (Singapore time) to hedge against volatility during Asian, European and US time zones.

For more information about SGX Nifty Futures Suite, please click here.

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