India could get nearly $4-b inflows on US pension board's index switch
Reliance Industries, ICICI Bank, Infosys, HDFC Bank, and TCS could be the primary beneficiaries of a recent decision by the Federal Retirement Thrift Investment Board, a US Pension Fund, to change its benchmark index for its International Stock Index Investment Fund. The move is estimated to result in flows worth $3.7-$3.8 billion into Indian equities in 2024, according to Nuvama Institutional Equities.
The total foreign portfolio flows into the country's secondary market so far in 2023 are $80.69 billion.
The Federal Retirement Thrift Investment Board earlier this month said it is shifting the benchmark for its fund to the MSCI All Country World excluding the US, China, and Hong Kong markets from the current MSCI Europe, Australasia, and Far East (EAFE) Index. Though specific timelines for the shift have not been announced, the transition is anticipated to take place next year.
Japan holds the highest weightage at 17% in the index, while India ranks seventh in the index and has a weight of 5.3%.
Analysts said the absence of China would benefit markets like India. According to an estimate by Nuvama Institutional Equities, Reliance Industries could see an inflow of $243 million, while both ICICI Bank and Infosys could witness an inflow of $160 million each.
HDFC Bank and TCS are expected to receive an inflow of $142 million and $105 million, respectively.
«Potential flow in 2024 is a positive step for India in attracting more stable FII flows,» said Abhilash Pagaria, head of alternative & quantitative research, Nuvama Institutional Equities. «However, impact may not be a significant needle mover for stocks or market at large as the flow will be distributed across 563 stocks in proportion to their free float.»
