The Indian equity markets are expected to see an inflow of around ₹30,000 crore from a major US pension fund from 2024 onwards, which could give a boost to local stock, according to analysts.
The US federal government’s retirement fund has decided to change the benchmark
equity index for expanding international exposure. Analysts believe the move could lead to a churn of $28 billion across
global stocks while India could see inflows of $3.6 billion (more than ₹30,000 crore) from 2024.
The Federal Retirement Thrift Investment Board, which is one of the major US pension funds, recently decided to switch from MSCI EAFE index to MSCI ACWI ex USA and ex China.
The pension fund will start changing the benchmark index 2024, which would lead to an increase in the weightage of Indian shares and may attract new funds. The pension fund focuses on emerging market equities ex-China, ex-Russia, according to analysts.
The Federal Retirement Thrift Investment Board has total assets of around $600 billion. The board has invested around $68 billion in the International Stock Index Investment Fund as of October 31, 2023.
The Fund uses MSCI EAFE, which comprises 21 developed markets across Europe, Asia, Australia and the Far East, as benchmark index. India is not included in the MSCI EAFE index.
The MSCI ACWI ex USA and ex China, on the other hand, has a mix of developed markets and emerging markets.
Foreign portfolio investors on a cumulative basis have invested around ₹96,340 crore in Indian equities so far this calendar year, helping the benchmark indices Sensex and Nifty to scale life-time highs.
According to analysts, improving risk appetite in the emerging markets and falling risk-free yields in the US would draw foreign fund flows towards India.
