Canadian pension funds unruffled by diplomatic warfare?

Amid the diplomatic ruptures between India and Canada, analysts at Dalal Street are carefully combing through data to assess the possible impact of further deterioration in relations on Indian equites.

At the centre of their analysis are the Canadian pension funds which hold nearly Rs 2 lakh crore of Indian equities.

The Canada Pension Plan Investment Board (CPPIB) - the largest investor in India has been trimming its stake in Indian equities over the last one year. The fund held Rs 45,000 crore of equities as of March 31 and reports claim that it has already sold about Rs 8,500 crore worth of stocks so far this year.

Analysts downplay the selloff. They say that the dilution in holdings could be more to profit off the high share valuations in India rather than be a result of the bitter exchanges between the political leaders of the two countries.

V K Vijaykumar, Chief Investment Strategist, Geojit Financial Services told news media that funds like CPPIB will continue to invest in India till diplomatic relations between India and Canada completely break down. “Drastic measures by the two governments are unlikely at this time”, he adds.

The fund held over 1 per cent stake in at least 5 listed stocks as of June 2024. CPPIB’s largest exposure was in Kotak Mahindra Bank. Of the 2.68 per cent it held as on March 2024, the fund has encashed 1.6 per cent through open market for Rs 6,123 crore.

The other key holdings of the fund include Indus Towers, Nykaa and Delhivery. CPPIB also holds a stake in 139 Indian stocks including Reliance Industries, Infosys, Zomato and Tata Consultancy Services.

Vinit Bolinjkar of Ventura Securities says, “While there is a concern that Canadian funds may sell Indian equities given the souring diplomatic ties, we do not expect them to act in a hurried manner as India still is an attractive market for them.”

Experts also believe such funds are pension funds and are long term investment plans so they are unlikely to change strategies based on short-term events.