New Delhi: In a move that will bring considerable relief to Indian equity markets roiled by the global credit crisis, the Norwegian sovereign wealth fund (SWF), plans to invest around $2 billion (about Rs9,772 crore) in India, primarily in equities, over the next two months because it has increased India’s weightage in its investment portfolio.
According to Thorvald Moe, deputy secretary general in the Norwegian finance ministry, India’s weightage was enhanced recently to 0.94% from the earlier 0.2%. The enhanced weightage will see an inflow into India of around $2 billion, which needs to be invested by the end of this year, Moe said.
This money will come into the country at a time when foreign institutional investors (FIIs), the main driver of Indian stock markets, have taken out close to $11.2 billion from the country since January.
In this period, Sensex, the benchmark index of the Bombay Stock Exchange has fallen by almost 50% to 10,683.39, the level it closed at on Tuesday.
An SWF is a global investment fund owned by a government and generally run by it. Unlike a private international investment fund, which is governed by profit motives, SWFs might have national strategic objectives that have made them controversial investment vehicles.
This year, following an internal debate on the security threat SWFs pose, the government decided to follow the finance ministry’s suggestion that India could at this time ill afford to be picky about the kind of overseas investors who bring in money. “There will certainly be an impact here. In a difficult environment, an incremental change makes a difference both ways (buying or selling)," Ved Prakash Chaturvedi, managing director of Tata Asset Management Ltd said on the prospect of a $2 billion inflow.
The Norwegian SWF, dubbed Government Pension Fund-Global, has a corpus of about $350 billion and invests 60% of its corpus in equity, 35% in fixed income and the balance in real estate.
“We expect it (Norwegian SWF) to be $600 billion in two to three years," Moe said. India and China, with close to 1% weightage, are among the leading emerging markets in the SWF’s portfolio. The largest investments are directed to the US and the UK which have weightages of about 30% and 15% of the corpus, respectively.
The Norwegian SWF is constantly replenished by the country’s petroleum exports.