RIL, Infosys, TCS, ICICI, HDFC Bank: 5 stocks may see $800 mn inflows on pension fund’s index switch

The US-based Federal Retirement Thrift Investment Board (FRTIB) on November 14 announced the probable transition to new MSCI Index but the excitement among market participants surged only later. Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research said that the move could lead to a potential flow of $3.7-$3.8 billion in 2024 but is unlikely to sway the domestic market in a big way.

He sees five stocks namely Reliance Industries Ltd, ICICI Bank Ltd, Infosys Ltd, HDFC Bank Ltd and Tata Consultancy Ltd alone accounting for $809 million inflows. The flows would be distributed among 563 stocks.    

"While it's a positive step for India in attracting more stable FII flow, the impact may not be a significant needle mover for stocks or market at large, as the flow will be distributed across 563 stocks (4 more detached stocks are yet to be listed) in proportion to their free float," Pagaria said in a note,.

Pagaria said it's not clear regarding the timelines and how the transition will happen — whether all at once or in four to six parts, as the circular suggested “The FRTIB will work with its fund managers to implement the transition from the current index to the new index in 2024."

As per early estimates, RIL may attract $243 million inflows, followed by ICICI Bank ($160 million), Infosys ($159 million), HDFC Bank ($142 million) and TCS ($105 million).

Other key beneficiaries of the announcement could include Axis Bank Ltd ($77 million), Bharti Airtel Ltd ($72 million), Larsen & Toubro Ltd ($70 million) and Hindustan Unilever ($69 million).

 

 

The transitioning index is the MSCI All Country World (ACWI) ex USA ex China ex Hong Kong Investable Market Index, encompassing 44 countries with a total of almost 5,633 stocks. Japan holds the highest representation at 17 per cent, while India ranks seventh and carries a weight of 5.3 per cent with 567 companies making the cut to this index.

As of October 2023, the asset under management (AUM) tracked by the TSP US pension I fund was close to $68 billion.

 

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