The relationship between India and Canada has taken a surprising, sour turn this month—sparked by accusations over the killing of a pro-Khalistan Canadian citizen and activist. This has upended a historically friendly relationship with strong financial ties between the two countries. Despite the tit-for-tat expulsions of diplomats, and freeze on free-trade agreements and visa services, Canada has a significant investment in India’s stock market, according to NSDL. With Rs 1.77 lakh crore parked in Indian assets, including Rs 1.5 lakh crore in equities, Canada is the seventh-largest player in India's capital markets.
Canadian Foreign Portfolio Investors (FPIs) have major investments in Indian infrastructure funds, real estate assets, logistical parks, listed entities and unlisted start-ups.
The two major Canadian investors in Indian equities are Canada Pension Plan Investment Board (CPPIB) and Caisse de dépôt et placement du Québec (CDPQ). At the end of FY23, CPPIB’s portfolio in India was worth over Rs 1.3 lakh crore and held stakes in about 70 listed Indian firms. By the end of 2022, CDPQ’s portfolio in India was worth around $6 billion.
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Let’s first look into investments (stakes greater than 1%) held by Canadian pension funds in listed Indian companies. CPPIB currently holds over 1% stake each in six stocks, with its biggest investment in terms of value being in Kotak Mahindra Bank. The total holding value of its investments in these six stocks is Rs 16,002.8 crore. It also owns stakes in the US-listed securities of Infosys, Wipro and ICICI Bank.
CDPQ’s total holding value in listed companies where its stake is greater than 1% stands at Rs 1,123 crore. Its biggest investment in terms of value is Piramal Enterprises, followed by Mahanagar Gas.
Holding value of large Canadian FPIs decline
The holding value of Canadian FPIs in the Indian equity market in the Indian equity market reduced over the past year. While CPPIB increased its investment in Indian equity at the beginning of FY23, its holding value fell by 17% YoY and 26.7% QoQ.
CDPQ slashed its Indian market holdings to less than half, marking a cut of 75.3% YoY and 62.7% MoM.
Holding value of Canadian FPI investments in Indian stocks falls YoY
Canadian firms prefer the banking & finance sector
Canadian firms have preferred the Indian banking & finance sector over the past year. CPPIB’s portfolio heavily leans towards the banking sector (59.4%), followed by software & services (22.2%) and transportation (11.6%). It also has investments in the telecom sector.
Canadian investments prefer the banking & finance sector
CDPQ also primarily focuses on banking & finance, accounting for 66% of its Indian portfolio, with additional stakes in utilities (9.5%) and diversified consumer services (8.7%). The firm has also invested in sectors like realty, cement & construction, and pharmaceuticals & biotechnology.
Over the past few years, CPPIB has expressed plans to invest about a third of its portfolio in emerging markets by 2025, with India featuring prominently. Despite current diplomatic tensions, experts reportedly don’t expect a long-term impact on Canadian investments in India. However, any escalation could put pressure on these investors, and the could put pressure on these investors, and the companies where Canadian holdings are significant.
This analysis by Trendlyne is meant for investor education - to help understand companies and make informed investment decisions on their own. It should not be considered an investment recommendation.
