Could you please help us find the accurate information regarding the newly popular Gift Nifty Futures Contract?
Since you and the Dhan team have access to people who are familiar with the subject, I thought it would be easier for you to help the Dhan Forum users become familiar with accurate information regarding this newly introduced trading instrument at the NSEIX exchange.
Are the money stored in INR or USD in the trading accounts at the NSEIX exchange to trade Gift Nifty Futures derivative instrument?
Is the Gift Nifty Futures derivative traded in INR or USD?
Is there a lot size for the Gift Nifty Futures Contract?
What is the total value of the instrument?
How much funds ( SPAN MARGIN ) is required in the trading account at NSEIX to buy 1 lot of the Gift Nifty Futures Contract?
How much funds ( SPAN MARGIN ) is required in the trading account at NSEIX to Short Sell 1 lot of the Gift Nifty Futures Contract?
Hi @pulsate_half441 NSEIX is as good as an exchange set up offshore (consider GIFTY City SEZ as out of India). So any transaction taking place there is done in USD (being the worldwide accepted currency).
1… The trading account has to be opened with IBU which handles the Forex transactions.
2… It is traded in USD. You can find the contract specifications here.
3… Lot size is not as per what our general understanding is. Since it was mainly floated for the FII and FPI to hedge their risk, it is denominated in USD. For example, Current NIFTY is 19800. So its value in GIFT would be 2 x 19800 = USD 39,600.
Now think from an FII perspective, you can buy or sell 39,600 USD contract in one go. Assume as an FII you had invested USD 40,000 in India and you believe that your investment might be at risk, so you can easily go and short GIFT NIFTY (1 contract). Since your settlement will be done in USD, you wont be facing any exchange rate risk. At max your loss would be USD 400.
Now on the other hand you are bullish on India (as most of the FIIs are ) but you dont have USD right now (awaiting USD inflow from selling your assets in home country or other counties and bring investment to India). So you can easily go and buy GIFT Nifty so that you can lock in USD 39,600 as buying price. Again no exchange rate risk
Now from Indian perspective, 82 x 39,600 = 32.47 lakh. Lot size of Nifty is 50 so contract value is 9.9 lakh. Hence, the multiplier is 3.27. So you can consider the lot size as 163.5 but again no use as trading in GIFT is not allowed for Indian Residents
4…Answered in 3
5… Initial margin is 5% for Index Derivatives i.e. USD 1,980*
Very well answered, @iamshrimohan. Hat tip for you!
@Shally Thanks for the hat-tip!
Sharing another insider of Arbitrage trading in NSE and SGX Nifty (now GIFT Nifty) which possibly only a few people might be aware of.
Mainly big brokers/HNIs operate this way - Float an entity Offshore (mainly Dubai as its easy there). Now with a domestic arm, buy Nifty 50 and Sell Gift Nifty (Gift Nifty is always at a premium). As the multiplier is 3 point something, need to buy 10 lots Nifty 50 and Sell 3 lots of Gift Nifty. Using currency options, the exchange risk was mitigated and at the end of the month, the prices will converge and a trader can earn risk free arbitrage return.
Disclaimer: Do not consider this as a trading strategy or recommendation.
Thank you Ji for bring clarity on this subject concerning the Gift Nifty Futures contract.
Also considering all the incentives of direct and indirect tax exemption offer on the NSEIX exchange, I can only assume that Christmas has come early for all the HNI traders out there.