Sovereign wealth funds see 60% rise in India assets, touch Rs 4.7 lakh crore mark

The world’s biggest sovereign funds are upping their bets on India – the fastest growing market. The total securities owned by sovereign wealth funds in India soared nearly 60 percent in the one-year ending April 2024 to touch Rs 4.7 lakh crore, data compiled from the National Securities Depository Limited (NSDL) showed. In 2023 the assets under custody of sovereign wealth funds was Rs 3 lakh crore, data showed. In contrast, the assets under custody of overall foreign portfolio investors (FPIs) grew about 40 percent during 2024 to reach Rs 69.5 lakh crore, data showed.

Market experts say India is increasingly becoming a preferred destination for such foreign government funds due to strong growth potential and ease of doing business. In the last five years, the central government has eased the compliance process for such funds and has also provided special tax exemptions for certain sovereign wealth funds such as the Abu Dhabi Investment Authority.

“Promising growth rate and political stability have made India a hotspot for direct investments by Sovereign Wealth Funds. Continuance of tax sops will further encourage continued inflow of such funds.” said Neha Aggarwal Jain, Partner, Deloitte India.

Sovereign funds including Government of Singapore, Abu Dhabi Investment Authority, Kuwait Investment Authority and Norwegian pension fund are major players in the Indian market.

The government of Singapore’s biggest investments in Indian stock markets are in companies such as Reliance Industries where the fund owns a 1.5 percent stake worth about Rs 30,000 crore at current market prices, Trendlyne data showed. It also owned 2.34 percent or shares worth around Rs 25,000 crore in HDFC Bank, data showed.

Abu Dhabi investment Authority has significant investments in an array of Indian companies including IPCA Laboratories, Welspun and Avas Financiers amongst others, Trendlyne showed. The Abu Dhabi government is also a major investor in the infrastructure sector of India – an investment that is routed through the Foreign Direct Investment (FDI) route. The Norwegian pension fund owns shares in dozens of Indian listed companies including Axis Bank, Bajaj Auto and Eicher Motors, data showed.

“India has recently witnessed a surge in asset allocation by sovereign wealth funds. This is primarily due to tax exemptions and other reasons including relaxation in KYC norms for these funds which substantially reduces the compliance and onboarding time.” said  Manoj Purohit, Leader – Financial Services Tax, BDO India.

“The extension of tax holiday announced in the recent budget reflects the government’s commitment to have a large pie of investments in India in the infrastructure sector by these Fund houses.”

Not just sovereign wealth funds, India is also seeing strong interest from other foreign government institutions such as central banks. As per market regulator Sebi’s classification of foreign portfolio investor (FPIs), there are four types of foreign government entities that invest in India: sovereign wealth funds, pension funds, central banks and other funds where a foreign government owns more than 51 percent. Currently, these four categories of funds put together own assets worth Rs 17.2 lakh crore which is nearly one fourth of overall FPI assets under custody.

Source:- Moneycontrol