Worsening Canada-India diplomatic ties may take a toll on FPI flows

Deteriorating ties between India and Canada could have a bearing on flows into the domestic capital markets. At present, Canada is the seventh largest country for foreign portfolio investor (FPI) flows into India.

According to the National Securities Depository Ltd (NSDL), the assets under custody (AUC) of FPIs domiciled in Canada stood at nearly Rs 1.8 trillion ($21 billion) at the end of August.
 

Almost 85 per cent of these investments are in listed equity, while the remaining in debt and hybrid instruments.
 

The Canada Pension Plan Investment Board (CPPIB), one of the world’s largest retirement funds, is among the biggest FPIs investing in the domestic market. CPPIB has large exposure to domestic companies, real estate investment trusts (REITs) and infrastructure projects.
 

Among its key India investments are a 2.68 per cent stake in Kotak Mahindra Bank, valued at over Rs 9,500 crore ($1.1 billion), and $205 million infusion into IndoSpace’s real estate fund. It also has investments in Byju’s.
 

CPPIB also holds stakes in new-age companies Paytm, Delhivery and Nykaa.
 

After setting up an office in Mumbai in 2015, the Canadian pension body has stepped up its investment in India.
 

Market players don’t rule out a slowdown in capital flows from Canada until the relationship between the two nations improves.

However, they ruled out large-scale redemptions from India.