India INX catches global traders' attention, assists GIFT City to become next global financial hub!

As of now BSE's flagship index – Sensex 50 is traded on India International Exchange (India INX) and is catching trader's attention. The total turnover on the India INX is increasing steadily and has reached USD 57.7 billion in August 2020, with a market share of 57 per cent against comparable index in Singapore. There are as many as 100 proprietary traders active on the exchange and more than 40 members are currently active with more members awaiting the regulatory approvals.

Recently, National Stock Exchange (NSE) decided to tie-up with Singapore Exchange Ltd (SGX) for launching several financial products from one of the most promising financial destinations that may change the way global financial players view Gujarat International Finance Tec-City (GIFT City). 

Indian traders are allowed to invest in stocks listed abroad under the Liberalised Remittance Scheme (LRS) up to USD 250,000 a year in stocks traded in any exchanges or asset classes abroad, however, the rules and regulations do not allow the Indian citizens to invest in the international market through GIFT City. Also, under the LRS rules, investors can invest but can not take speculative exposure in derivatives.

GIFT City has some inherent advantages with the International Financial Services Centre (IFSC) being allowed to set up branches for banks, depositories and other financial services intermediaries. Similarly, we can expect the foreign brokers to set up branches in GIFT City if permitted by SEBI. This will put India on the global map as an important international financial centre. More participation from foreign brokers and investors will be seen in the coming years with this kind of development in GIFT City.

The IFSC Zone is expected to be extremely competitive and will be tax-friendly for investors with single window clearance and relaxed Company Law provisions. Traders will see GIFT City favourably because of two main advantages – No taxes and lower margins on products traded on the exchange in line with the international norms. GIFT City is declared as an SEZ and hence will not attract any taxes. There are reports that there will be a new regulator which will oversee the functioning of the international exchanges located in GIFT City. As of now, it is SEBI which is the regulator of India INX.

With such rapid developments taking place in one of the pet projects of Prime Minister Narendra Modi i.e ‘Gift City’, we can expect India to be one of the most sought after financial destinations for global financial intermediaries and traders.