For sovereign funds, India is the place to be

With volatility plaguing global commodity markets, sovereign wealth funds (SWFs) have turned to India to park their funds. The value of Indian stocks held by these investors is up 32 per cent in the first eight months of 2016, at ₹2.31 lakh crore. In 2015, too, SWFs were net buyers of Indian equity, with the value of their holding rising 14 per cent.

Some of the world’s largest funds, such as Norway’s Government Pension Fund Global, the Government of Singapore Investment Corporation (GIC) and the Abu Dhabi Investment Authority (ADIA), hold a chunk of listed Indian stocks.

Around 10 per cent of capital market assets held by foreign portfolio investors (FPIs) come from SWFs. They are the third-largest category of foreign investors currently, after mutual funds, which account for 45 per cent and broad-based funds, which corner 19 per cent of FPI funds.

It was the annual report of the Sovereign Investment Lab, the research partner for the International Forum of SWFs, that picked India to be the global bright spot.

“With 36 completed deals, India wins the prize for the most attractive target country of 2015 by number of operations … the broad diversification of investments across sectors is a definite sign of economic vitality,” the report states.

A young population, a slight increase in income inequality — a promising sign of a rising middle class — and a business-friendly new leader are the attractions in India, the report adds.

Spreading it out

These funds have managed to weather the crash in oil and commodity prices over 2015 and 2016 relatively well, without too much of a reduction in their overall assets.

Globally, assets managed by SWFs towards the end of March 2016 were valued at $6.5 trillion, up $200 billion over the previous year. While 45 per cent of the funds have recorded an increase in assets under management, 36 per cent have registered a decrease, with 19 per cent logging no change.

The recent volatility in commodities has made the funds more alive to the need for diversification: in 2015, the retail and healthcare industry attracted $4.6 billion and $2.6 billion of SWF money, respectively. Read more…