Canada, Japan up India bets
Investors double Indian equity holdings in past year
India’s long-term growth potential and politically stable environment are leading investors in more nations to raise their bets on the country. Canadian investors have doubled their holdings in listed Indian shares in the past year. Canada is now the seventh largest investor in India and stands a good chance of overtaking Norway, the UK and Luxembourg to enter the top five league.
India’s long-term growth potential and politically stable environment is leading investors in more nations to raise their bets on the country.
Canadian investors, who have historically not had a big exposure to Indian equities, have doubled their holdings in listed Indian shares in the past year. Canada is now the seventh largest investor in India and stands a good chance of overtaking Norway, the UK and Luxembourg to enter the top five league.
Canadian investors' holdings stood at ~17,500 crore at the end of June, up from ~8,541 crore a year ago, data collated from Prime Database show. Canadian investors’ holdings amounted to a mere ~150 crore in 2009. The equity holding data collected by Prime Database is for investors with at least 1 per cent stakes in listed companies.
The BSE Sensex has risen 14.5 per cent in the one year to June and has doubled in the last eight years.
India is seen as a bright spot among emerging markets, and its political stability, democratic set-up and growth prospects make it a safe bet for parking long-term money. The India story is better understood internationally now than a decade ago, say experts, which is spurring interest from more countries.
Major Canadian investors include Canada Pension Plan Investment Board (CPPIB), and Caisse De Depot Et Placement Du Quebec (CDPQ). The value of their combined equity holdings stood at ~15,600 crore at the end of June. Other notable investors include Ontario Teacher’s Pension Plan and Mawer Investment Management.
“India’s economic fundamentals remain strong, and we have seen continued growth in the economy over the past few years. We believe that India will be a leading source of global growth in the coming years and that there will continue to be attractive investment opportunities for a long-term investor like CPPIB,” said Suyi Kim, head, Asia-Pacific, CPPIB.
Since it first invested in India in 2011, CPPIB’s investments total over $5.8 billion Canadian dollars across the listed and unlisted space. “We continue to focus on infrastructure, real estate, principal credit, private equity and public equities where we can work with strong local partners to meet our long-term target for India,” added Kim.
An email sent to CDPQ did not draw a response.
According to UR Bhat, managing director at Dalton Capital Advisors (India), India is now seen as a mainline investment destination rather than just part of the emerging market grouping. “The size of the market has become sufficiently large, the currency is steady, the fiscal situation is stable, and the country is politically a lot more stable than many of its emerging market peers. All these factors are attracting long-term money from pension and endowment funds as well as bringing in new investors,” Bhat said.
Equity holdings by Japanese investors, too, have risen five times in the past year to ~5,014 crore at the end of June, making the country a top 10 investor in Indian equities. “Japanese firms such as Sony and Suzuki have tasted success in India and the country’s investors are familiar with India’s regulatory environment and aware of its future growth potential,” observed Bhat.
The US, Mauritius, Singapore, Luxembourg and the UK remain the top investors in Indian equities. Between US MAURITIUS SINGAPORE LUXEMBOURG UK NORWAY CANADA JAPAN NETHERLANDS them, the US and Mauritius together hold about ~3 lakh crore worth of Indian equities while Singapore, Luxembourg and the UK together hold ~1.25 lakh crore.
Notably, Indiafocused offshore funds and exchangetraded funds (ETFs) received net inflows of nearly $5 billion in the first six months of the year, the second highest in the past five years. The flow largely came into India-focused offshore funds, which signifies long-term money.
According to market watchers, India’s weight in the MSCI EM Index will rise in the coming years, which will attract a higher quantum of overseas inflows. “India is under-represented in the MSCI EM index relative to its GDP. As its index weight rises, foreign flows will become larger, and the equity market will attract larger quantities of opportunistic flows,” said Ridham Desai, equity strategist, Morgan Stanley India.
At 27.5 per cent, foreign portfolio investor ownership at the end of June is at record levels, surpassing the previous high of 27.3 per cent in September 2016. Overall, FPI assets are valued at $395 billion. Total equityholdings (~ cr)* UNITED ARAB EMIRATES 1,94,485 1,28,148 75,524 25,829 23,338 17,652 17,407 9,021 5,015 3,584