World's biggest sovereign wealth fund increases its bets on India

Norway’s Government Pension Fund Global, the biggest sovereign wealth fund in the world, has increased its bets on India by 27.2 per cent to $9.4 billion. This is the highest since 2005. The number of equity investments has also risen. It is up from 253 in 2018 to 317 as of 2019-end.

The fund makes annual disclosures on its portfolio. The latest one was out on 27th February, along with the release of its annual report. India was among its largest exposures in emerging markets.

"Emerging markets (including frontier markets) accounted for 11.3 percent of the funds equity investments. Chinese equities returned 29.7 per cent in local currency, or 27.6 per cent in the funds currency basket. China accounted for 4.3 percent of the funds equity investments and was its single-largest emerging market, followed by Taiwan at 1.8 percent, and India at 1.2 percent," it said.

There are 83 companies in the equity portfolio which didn’t have a place in the previous year’s disclosures, shows an analysis of data from the past two years.

The top new entrants include Varun Beverages, HDFC Life Insurance Company, HDFC Bank, Info Edge India, PVR, IDFC First Bank, Hemisphere Properties India, AU Small Finance Bank, Manappuram Finance, and Godrej Properties. The largest equity holdings in the portfolio include Reliance Industries, Housing Development Finance Corporation, Infosys, Tata Consultancy 

Services, and ICICI Bank. These five stocks account for $2.5 billion, or nearly a quarter of the equity portfolio’s total value.

The company also has six Indian fixed income investments worth $2.4 billion. This represents an increase in fixed income investments in India, as bets last year were worth $2.1 billion.

Investments in India gave 6.6 per cent rupee returns. The returns were slightly lower at four per cent in the fund’s own currency basket. The currency basket is based on currencies in the fund’s benchmark indices.  Norway set up its sovereign wealth fund after it discovered oil on its territory. The income from the fund serves to cushion fluctuations in oil revenue. 

The Government Pension Fund Global invests in equity, debt, as well as real estate. It owns 1.5 per cent of all shares in the world’s listed companies. The fund has also lately been pushing for more sustainable investments, keeping in mind environmental and social issues. 

Foreign portfolio investors were net buyers by Rs 1 trillion in 2019, shows data from depositories, though they have been net sellers in recent days.

The current bout of selling is likely to be from investors with a more short-term horizon, according to Deven Choksey, managing director of KRChoksey Investment Managers. This can be an opportunity for entities like sovereign wealth funds or endowment funds willing to ride out the turmoil, according to him.

“The situation is...more favourable for those investors with money who are planning for (the) long-term,” he said.  

Jimmy Patel, managing director and chief executive officer at Quantum Asset Management Company said that people are taking a short-term view for now as there is a scramble for safety. The relative position of India compared to its peers remains intact.

“India looks more attractive as compared to others,” he said.