Discover how growing tensions between Canada and India could affect businesses and India’s stock market.
The tension between India and Canada is escalating, especially regarding the issue of Khalistan. The Financial Express reports that the Indian government has instructed approximately 40 Canadian diplomats to leave the country.
The relationship between India and Canada holds great significance, especially in terms of trade and markets. Canadian companies have investments in India, and Indian companies have also made investments in Canada. You might be wondering what the consequences could be if the relationship between these two countries worsens further, especially for businesses, companies, and the Indian stock market.
Let’s explore and find answers to these questions.
The strain in relations between India and Canada did have an impact on the Indian stock market. In September, there was a withdrawal of Rs 12,000 crore from India. However, as per the Navbharat Times, this tension has not affected Canadian investment in India. The report suggests that while investors did withdraw capital from the Indian market in September, there is no sign of Canadian investors participating in this trend.
To understand the impact of this tension on the Indian stock market fully, it is important to look at the past investment relations between the two countries. India has been a significant destination for Canadian investments, with entities like the Canadian Pension Plan Investment Board and asset management firm Brookfield investing in various sectors, including infrastructure and startups.
According to Invest India, Canada ranks as India’s 18th largest foreign investor, with cumulative investments totalling $3.3 billion between April 2000 and March 2023.
As per the Business Today report, India was Canada’s ninth-largest trading partner in 2022, with trade between the two countries reaching $8.16 billion in FY23. Key Indian exports to Canada include pharmaceuticals, iron and steel products, and telecom equipment, while India imports coal, fertilisers, and pulses from Canada in significant quantities.
Additionally, more than 600 Canadian companies are present in India, and over 1,000 companies are actively conducting business in the Indian market. Indian technology companies are also investing in Canada, collaborating in areas like cybersecurity, technical education, and software development.
Impact on the Indian Stock Market
The Canadian pension fund had a 6% stake in Delhivery at the end of the June quarter, as per data from the June-quarter shareholding pattern available on BSE. Furthermore, it held approximately a 2.68% stake in Kotak Mahindra Bank as of June 30, 2023.
In addition to these holdings, the Canadian Pension Fund also had a 2.42% stake in Zomato, 2.18% in IndusTower, 1.76% in Paytm, and 1.47% in Nykaa.
Canada Pension Fund’s Stake in New-Age Tech Companies
As reported by LiveMint, the Canadian pension fund holds stakes in certain Indian firms that are listed abroad. For instance, it has approximately $11.92 million invested in Wipro’s US-listed shares. Additionally, it holds a stake in Infosys’ US-listed shares, valued at about $21.7 million. The Canadian pension fund’s investment in the US-listed shares of ICICI Bank is worth around $10 million.
Experts suggest that Canadian pension funds have collectively invested more than Rs 1 lakh crore in Indian companies. While there may not be an immediate risk, these companies could face some pressure if tensions between India and Canada were to escalate further.
According to Navbharat Times, the Canadian pension fund is experiencing favourable returns from the Indian market. This is why, despite the growing tension between the two countries, Canadian investors haven’t sold their investments yet, and they would prefer not to incur any losses in the future.
In terms of market sentiment, as reported by Mint, some experts believe that the ongoing tension between India and Canada might bring some negative sentiment to the market in the short term. However, it is unlikely to have a significant long-term impact on the market. These experts note that the tension between Canada and India is on the rise, and this may indirectly affect the Indian market.
Only time will tell how the situation develops further.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned are for information purposes only. This is not an investment advice.