The recent tensions between India and Canada have stirred concerns in the investment community, particularly due to the significant stakes held by the Canada Pension Plan Investment Board (CPPIB) in Indian companies. Despite the escalating diplomatic conflict, market analysts suggest that the issue is unlikely to significantly impact Indian tech stocks or the broader market.
The relationship between the two countries began deteriorating earlier this week following Canadian Prime Minister Justin Trudeau's allegations potentially linking the Indian government to the assassination of Sikh separatist leader Hardeep Singh Nijjar in Canada. In response, India expelled a senior Canadian diplomat and temporarily suspended visa services in Canada on Thursday.
In the midst of these tensions, there has been a noticeable correction in the Indian equity market this week, including a decline in the prices of new-age tech stocks like Paytm, Zomato, and Nykaa. Nevertheless, experts believe that this correction is not necessarily linked to the India-Canada dispute but rather to other factors such as the hawkish stance of the US Federal Reserve.
CPPIB, one of Canada's largest pension funds, has a significant presence in India with net assets worth around INR 1.3 Lakh Cr at the end of FY23. This includes investments in listed startups such as Zomato and Nykaa, as well as major companies like Kotak Mahindra Bank and IIFL Wealth. The fund also holds stakes in unlisted Indian tech startups including ACKO, VerSe Innovation, and BYJU'S.
Despite recent tensions, Prashanth Tapse, senior VP (research) at Mehta Equities, said that these developments are unlikely to fundamentally affect stocks CPPIB has invested in. He added that any decision to exit India due to political turmoil would be well communicated and managed by the Indian government.
Parth Nyati, the founder of the stock trading platform Tradingo, echoed these sentiments, stating that the market seems to be viewing the issue primarily as a political one. He added that pension funds, known for their long-term investment perspective, typically do not react hastily to such geopolitical events.
India and Canada's strained relationship has also put negotiations on a free trade agreement (FTA) between the two countries on hold. Despite these developments, the broader consensus among market analysts is that the ongoing tensions are unlikely to have a major impact on Indian startups or the overall market.
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