21-Sep-2023
2 mins read
India and Canada are experiencing a deterioration in their diplomatic ties, with both nations recently declaring the expulsion of each other’s diplomats. This action follows Canadian Prime Minister Justin Trudeau’s allegations that Indian government officials may be connected to the assassination of Hardeep Singh Nijjar, a Khalistani militant.
Economic Implications
The escalating diplomatic dispute carries far-reaching economic implications, particularly in the realm of investments. Canada currently holds the position of the seventh-largest investor in the Indian capital markets, making the strained diplomatic ties a matter of grave concern for Canadian financial institutions and investors alike.
Canadian Investments in India
As of August 2023, Canadian investments in the Indian markets amounted to approximately Rs 1.77 lakh crore. The majority of this capital, approximately Rs 1.5 lakh crore, has been channeled into India’s equity markets, according to data from the National Securities Depository Limited (NSDL).
Significant Presence of Foreign Portfolio Investors (FPIs) from Canada
NSDL data also reveals a noteworthy presence of 818 registered Foreign Portfolio Investors (FPIs) originating from Canada. While this ranks second to the United States, which boasts 3,473 registered FPIs, and Luxembourg with 1,368, it underscores the depth of Canadian involvement in India’s financial markets.
Key Canadian Investments in Indian Enterprises
The Canada Pension Plan Investment Board (CPPIB) plays a pivotal role in India’s investment landscape, holding substantial stakes in various Indian companies. Several standout investments include:
- Kotak Mahindra Bank: CPPIB commands a significant 2.68% stake in this private sector lender. The latest trading data reports a 1.82% decline in Kotak Mahindra Bank shares, trading at ₹1,757.55 per share on the BSE.
- Zomato: CPPIB possesses over 20.35 crore equity shares, equivalent to a 2.37% stake in the online food delivery aggregator. As of June 2023, Zomato shares were down by 0.75%, trading at ₹99.21.
- Delhivery: CPPIB boasts a substantial 6% shareholding in this logistics company, with ownership of 4.38 crore Delhivery shares. In the most recent trading update, Delhivery’s share price experienced a slight decline of 0.17%, trading at ₹429.70.
CPPIB’s influence extends to various other prominent Indian companies, such as Indus Towers, One97 Communications (Paytm), and FSN E-Commerce Ventures (Nykaa).
Foreign Portfolio Investments Rankings
The hierarchy of countries based on assets held by Foreign Portfolio Investors (FPIs) in the Indian market is as follows:
- United States (USA) leads with assets totaling Rs 22.7 lakh crore.
- Singapore follows with assets valued at Rs 5.24 lakh crore.
- Luxembourg secures the third position with assets amounting to Rs 4.23 lakh crore.
- Mauritius stands fourth with assets totaling Rs 3.73 lakh crore.
- Ireland holds the fifth position with assets worth Rs 2.92 lakh crore.
- The United Kingdom follows closely with assets totaling Rs 2.89 lakh crore.
- Canada ranks subsequent to the United Kingdom.
The ongoing diplomatic dispute underscores the need for urgent diplomatic efforts to resolve the crisis and restore stability in India-Canada relations, thus ensuring the security and growth of these significant investments in India’s financial landscape.