The diplomatic spat between Canada and India over the killing of a Sikh leader will prove to be a major blow to the burgeoning economic relationship between the two countries, the Stock Market said on Wednesday. India is a relatively small buyer of Canadian commodities, but a major factor in the education sector – India is the largest source of foreign students attending Canadian colleges and universities. Indian students are the main source of income for Canadian universities and colleges. Canada's largest public pension managers have invested billions of dollars in Indian companies and projects, including renewable energy, infrastructure and banks. There have been and will continue to be large gaps in the stocks of India-Canadian companies with mutual investments in each other's countries.
Amidst the verbal tension between Canada and India, the stock Market witnessed a heavy crash today and it was expected. After a slow start on Wednesday, the stock market saw a big rally. BSE Sensex is trending down 698 points at 66,898. After opening with a market of 67,200, the decline continued today. While the market has been seen breaking in Nifty as well. Nifty is currently trading around 20 thousand. Indian markets got off to a weak start on Wednesday as US bond yields hit a 16-year high ahead of the US Federal Reserve meeting results. Domestic benchmark indices opened with losses on Wednesday, led by losses in major stocks such as HDFC Bank, Reliance Industries and Infosys.
In early trade, the MGE Sensex was seen trading down 690 points at 66,900. At the same time, the Nifty was trading at 20,002, down 130 points. Shares of some IT companies fell as soon as business started in the stock market on Wednesday. Which includes stocks from Wipro to Infosys and from Kotak Mahindra Bank to ICICI etc. The companies whose shares fell are all companies in which money from the Canada Pension Fund Investment Board is invested. Canada's political tensions with India have heightened tensions for companies that do business there. Apart from this, the shares of the companies invested by the Canada Pension Fund have also been affected. Shares of Paytm's parent company fell by 2 percent as the stock market opened. The stocks of fashion and beauty brand Nayaka have also been seen trending down by one and a half percent.
The big three funds—the Canada Pension Plan Investment Board and the Quebec and Ontario pension funds—which collectively manage multibillion-dollar funds—have also opened their own independent offices in Mumbai and New Delhi in recent years. Canadian Prime Minister Justin Trudeau shocked India by saying that India was behind the killing of a Sikh separatist leader in a suburb of Vancouver in June. India denied any connection with the killing, calling the allegation absurd. It is unusual for both countries to expel each other's ambassadors. This kind of conflict between India and Canada has been brewing for the past decade as Canada has repeatedly favored anti-India separatist and Khalistani Sikh leaders. There are many examples of this in history.
However, in sum, the volume of Canadian investments in the Indian stock market may give small shocks, but it does not have an all-time effect. Also, the market is not going to suffer much from the Canadian shock as the losses will mainly be to Canada. The loss to India is that the loss to Indian investors who are lagging behind in companies whose operations have become stronger due to the investments of Canadian companies and companies in which Indian investors have jumped is really a loss. Apart from that, not much will change. Much bigger shocks have hit the Indian stock market before and this one pales in comparison. Yes, politically the shadows of this are very long.
