Canada-India diplomatic tensions expose Indian stocks

Amid escalating diplomatic tensions between Canada and India, data from corporate database AceEquity reveals that six Indian stocks, including Kotak Mahindra Bank Ltd, Zomato Ltd, and Delhivery Ltd, have significant exposure to Canada. The Canada Pension Plan Investment Board (CPP Investments), the country's pension fund, holds stakes ranging from 1.5% to 6% in these companies, valued at Rs 16,062 crore based on Wednesday's intraday prices.

Kotak Mahindra Bank emerges as CPP Investments' biggest Indian stock bet, with the fund owning 4,38,81,500 shares or a 2.68% stake as of June 30. These holdings were worth Rs 9,494.36 crore in Wednesday's trade. Zomato Ltd and Delhivery Ltd follow in the second and third spots respectively. The Canadian fund owns stakes worth Rs 2,050 crore in Zomato and Rs 1,884.49 crore in Delhivery.

Other companies exposed to Canada include Indus Towers Ltd and One 97 Communications Ltd (Paytm), where the pension fund holds stakes worth Rs 1,072.32 crore and Rs 951 crore respectively. Additionally, CPP Investments also owns shares worth Rs 610 crore in FSN E-Commerce Ventures Ltd (Nykaa).

The diplomatic rift between the two countries has been triggered by allegations made by Canadian PM Justin Trudeau regarding the Indian government's alleged involvement in the killing of a Khalistani separatist. India has dismissed these claims and retaliated by asking a senior Canadian diplomat to leave the country within five days.

Despite these geopolitical tensions, market experts like Parth Nyati, Founder at Tradingo, emphasize that pension funds typically maintain a long-term investment perspective and do not react hastily to such events. They are expected to adopt a strategic outlook and await further developments before making any significant adjustments.

In total, foreign portfolio investors (FPIs) in Canada manage Rs 1,50,871 crore (INR100 crore = approx. $12 million) in equity assets under custody (AUC). Among the FPI countries, Canada ranks seventh, with the US and Singapore leading the table.

CPP Investments' net assets stood at $575 billion at the end of the June quarter, with just over one-fourth of these assets located in the Asia Pacific region. Public equities account for 24% of the fund's holdings. In its first quarter, CPP Investments committed 160 million Canadian dollars ($1 = CAD1.3445) to multiples private equity fund IV targeting mid-market growth opportunities in India. It also invested an additional 537 million Canadian dollars in its Indian toll roads portfolio company IndInfravit Trust.

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This article first appeared in Investing.com