A $37 Billion Manager Cautions on India's World-Beating Stocks

  • India stock valuations higher than emerging-market rivals
  • Canadian fund plans investments in India’s soverign debt

The Story Behind India's World-Beating Stock Rally

Canada Pension Plan Investment Board, the country’s largest pension fund, is turning cautious on India’s stock market amid the South Asian nation’s world-beating equity rally and may buy sovereign debt for the first time.

“You don’t want to buy at a price that is not the proper intrinsic value,” Suyi Kim, managing director at Canada Pension said in an interview in Mumbai. “I always tell our team don’t get too excited when there’s a euphoria. When people get too excited, that’s the time you make mistakes.”

The fund manager’s more cautious stance is in line with equity mutual funds in the country, which raised the proportion of cash held to the most since 2012 in the March quarter. Equity valuations are close to the highest level since 2010 as overseas investors are lured to the fastest economic expansion among major global economies and hopes of more economic reforms under Prime Minister Narendra Modi.

India’s S&P BSE Sensex has rallied 13 percent so far this year, the best-performing equity benchmark among the world’s 10 biggest stock markets.

Kim leads Canada Pension’s investment activities in Asia and oversees a regional portfolio amounting to more than $37 billion. With about $219 billion under management globally, the fund has been investing in the Indian market since 2010, data available on its website show.

It has more than 20 percent of its overall asset base in fixed income and is considering buying India’s sovereign debt for the first time, said Vikram Desai, a Mumbai-based principal for Canada Pension. Infrastructure, natural resources, telecom towers, renewables and financial services are among sectors that the fund is scouting for opportunities to invest in India, Desai said.

The pension-fund manager opened in Mumbai in 2015, its seventh overseas office, and has an eight-member team in the country now. It will be expanding its operations and hiring more people in the nation, Kim said.

“Everybody seems to be very optimistic about India,” she said. “I’m very bullish on India in the longer term. It’s going to move in the right direction. But there will be ups and downs.”

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