China buys 1% stake of HDFC, Results in Downfall of HDFC Share Price

As COVID-19 takes over the world, the world economy is in crisis and on the verge of being collapsing. Indian Economy is safe from Covid19 crisis, “India will see it’s per capita income rise at above the 4% level in 2020” said the UN report, it also forecasted that Indian growth can get a 5% boost for current fiscal.

While India and China are safe from the worldwide economic crisis and may have positive growth in the next quarters. China plays a treacherous part in this crisis by buying Indian financial assets and flooding Indian share market with China-backed funds after the COVID-19 outbreak caused a major slump in the valuation of local companies reported by ET (Economic times).

According to the shareholding disclosures for the March quarter, China’s central bank has bought 1.01 per cent stake in HDFC, it held 1.75 crore shares of India’s biggest housing mortgage lender as in March Quarter. It resulted in 40% fall in HDFC shares this year.
The price of shares fell from ₹2,493 to ₹1,499.

How would it affect India?

HDFC owns 19.43 per cent stake in HDFC Bank and 51.45 per cent in HDF Life Insurance Company and 52.7 per cent in HDFC Asset Management Company. HDFC Bank owns a 96 per cent stake in HDB Financial services and 98 per cent in HDFC Securities.

The world’s second-largest economy is rapidly expanding its economic footprint, especially in Africa and South Asia. Of course, when China buys shares anywhere in the world, alarm bells start ringing and raises red flag.

China’s already-weak banking sector is bracing for a further setback from the coronavirus-led crash.
Chinese investors have been scouting for attractive investments and HDFC, India’s biggest private mortgage lender, is among the safest bets.
“One of the most vivid examples of China’s ambitious use of loans and aid to gain influence around the world” stated The New York Times.

India has reason to be worried because China is investing heavily in infrastructure projects in our neighbourhood, as part of its Belt and Road Initiative. Pakistan alone will get investments worth $60 billion to build the China-Pakistan Economic Corridor and $5.8 billion for building Gilgit-Baltistan Dam.

Sri Lanka has got billions of dollars of Chinese investments since the early 2000s.

India took the initiative to save its economy from being further exploited by making changes in India’s FDI(Foreign Direct Investment) policy. The central government has now revised FDI policy, “with respect to the revised FDI policy, investments from China will now require a clearance from the Centre”.

The amendment to the FDI policy done by Central Government states, “A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”

In addition, the Centre has blocked the indirect acquisition of investments by entities based in China. Now, change in ownership of the investment will also have to be cleared by the Union government.

Interestingly, the central government opted to use “country which shares a land border with India” refrained from naming China in the amended policy of FDI. Pakistan and Bangladesh based investors are already covered under the same rule.

Not just the Chinese, even the state-controlled Temasek in Singapore and the sovereign fund from Saudi Arabia have a stake in HDFC(India), said Chairman Deepak Parekh.

However, if an investor’s stake crosses 1 per cent only then companies need to disclose shareholding changes to the exchanges at the end of every quarter. Thus, it is not known yet whether the Chinese central bank bought all the shares between January and March.

The Latest

Elon Musk unveil Neuralink a brain-computer interface

Elon Musk recently unveils Neuralink a brain-computer...

Why China at Galwan?

The reason behind China standoff against India...

Dzhanibekov effect suggests Earth might flip upside down at any time, event would be catastrophic

Every planet rotates counter clockwise in our solar system as...

Modi’s government plans to make India self- reliant

Due to the pandemic Indians have to face the...

China asks India to support the principle of One-China policy

Ji Rong The spokesperson of Chinese embassy...

Companies are choosing India as a Destination to move out of China

China is worlds manufacturing superpower after...

China’s search engine giant Baidu launches its own blockchain called Xuperchain

China’s biggest search engine Baidu launches its...

Actual reason behind the so planar design of Tesla Cybertruck

Ever since Tesla CEO, Elon Musk unveiled...

IIT Madras has developed Iron-ion battery, an alternative to Lithium-ion

Researchers at IIT Madras has successfully developed...

Hubble found water vapor on an exoplanet beyond our solar system

Water vapor have been detected in the...

iPhone 11 pro and pro max are here, everything you need to know

By saying we have always believed by...

This creature’s silk is stronger than steel, here’s how

Tougher than any man-made material, spider silk...

Lander Vikram has finally been found, ISRO confirms orbiter took its thermal image

After loosing contact with the lander Vikram...

Huawei starts rolling out emui 10 with android 10

As you know, tensions between Huawei and...