Aspiration: To Be Gold Price-Setter
For sustainable growth and development, India has to strengthen its services sector, particularly financial services and technology, writes V Balasubramaniam, MD & CEO, India INX V.
An IFSC will be an important catalyst in this process as they provide the infrastructure for investment that drives entrepreneurial endeavours.
India set to be price-setter for Gold as second largest consumer of the precious metal in the world.
India INX based in GIFT City
With this vision, Gujarat International Finance Tec-City (GIFT), Gujarat, India has set up International Financial Services Centre (IFSC) – the only approved IFSC in India.
The GIFT IFSC is a gateway for inbound and outbound business from India, and fast emerging as a preferred destination for undertaking International Financial Services.
In Jan 2017, BSE launched India International Exchange (India INX) India’s first international exchange at GIFT City. The exchange, a wholly owned subsidiary of BSE, was inaugurated on January 2017 by Prime Minister Narendra Modi as the first International Exchange at IFSC.
As of 12 May 2020, cumulative trading volume on INDIA INX derivatives has crossed US$830+ billion with 65+ million contracts traded. The daily trading turnover has grown exponentially from less than US$1 million to over US$3 billion now and propelled India INX to be the dominant IFSC Exchange with market share of over 91% in derivatives trading in April 2020.
INDIA INX index derivatives trading on India 50 Futures and Options now exceeds the volumes of SGX Nifty at the Singapore Exchange. All this has been achieved in a short of span of over three years.
Global Securities Market, our primary platform, offers a debt listing framework at par with other global listing venues like London, Luxembourg, Singapore, etc.
Since launch in Jan 2018, Global Securities Market has been the preferred offshore listing platform of choice for Indian issuers with 100% of all Medium-Term Note Programme (MTN) and 99% of all bonds under External Commercial Borrowing at GIFT IFSC listed with us.
As on date, we have had leading issuers like Asian Development Bank, State Bank of India, PFC, ONGC, REC, EXIM Bank of India, IRFC, HUDCO, IndusInd Bank, NTPC, NHAI, Adani Group etc. establish their MTN programme with us alongside drawdowns and/or standalone issuances which are a healthy mix of masala, dollar denominated and green bonds.
India INX is also the first introducer of Green Securities Platform for issuance of green bonds. Till date, Global Securities Market has established US$48+ billion in MTN Programme and more than US$21+ billion of bonds. We have now effectively established ourselves as a serious rival to other international financial centres for Indian Issuers raising money from international investors.
Indian Rupee Derivatives and its attractiveness to foreign investors
The launch of INR-USD Futures and Options trading on the Exchange is a significant milestone and the right step in the PM’s vision for IFSC. It has provided a direct window to global investors to trade on India-linked products instead of other IFSCs such as Singapore and Hongkong.
India INX will also be a very efficient and effective for foreign investors having exposure to India underlying. Currently, foreign investors hedge currency risk using offshore INR-USD currency derivatives (OTC and International Exchanges).
Market regulator Securities and Exchange Board of India (SEBI) has provided position limit at US$1 billion for market participants trading in the Gift city IFSC for currency futures and options contracts involving rupee
Off-shore markets or overseas market have developed during the last few years where hedging in rupee exchange rate market has grown bigger than domestic market, which will be curbed with the launch of rupee derivatives at India INX.
The Indian Rupee US Dollar (INR-USD) product specifications are at par with international exchanges and non-resident Indians are also allowed to participate.
INR-USD is available in DGCX (Dubai) since 2007, SGX (Singapore) & CME (US) since 2013. Volumes are significant in DGCX & SGX where markets are open for 17 hours to 21 hours respectively. India INX offers nonstop trading for 22 hours which will be an added advantage as this will cater to clients from all time zones of the world.
Outlook
Announcements made in Budget 2019 and 2020 have reiterated the importance of GIFT IFSC as an emerging international financial services hub. Establishing a unified regulator has been put it in a fast track mode which will have its office in Gandhinagar, Gujarat, near GIFT City.
The government also proposed to set up an international bullion exchange at GIFT city, which will lead to better price discovery of gold, create more jobs and enhance India’s position in such market.
Other sops announced include extending income tax waiver of up to 10 years from five years, reduced withholding tax, exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gains tax to Category-III AIFs and interest payment on loan taken from non-residents.
Key measures related to aircraft leasing business, reinsurance business, tax reforms, will enable significant offshore finance activities to take place and create jobs at GIFT city. It will bring back billions of dollars of business which we have been losing to other competing global financial hubs.
Conclusion
The budgetary announcement is in line with Prime Minister Modi’s vision that GIFT City would become a price setter in some of the world’s largest traded instruments in the next 10 years.
India INX’s vision, in a way, is witnessing the trajectory and aspirations set by Prime Minister Narendra Modi with India 50 Futures and Options exceeding the volumes of SGX Nifty at the Singapore Exchange, the aim of bringing offshore equity trading has taken shape. The commencement of offshore rupee trading will further provide traction.
The government also proposed to set up an international bullion exchange at GIFT city, which will lead to better price discovery of gold. India is the second largest consumer of Gold and this is a step forward in becoming “price setter” from its current status of price taker. fiinews.com
