India will be a major beneficiary with potential inflows of nearly $3.5 billion from a revision in the benchmark index by the US federal government's primary pension fund, according to Sriram Velayudhan, VP of Alternative Research at IIFL Securities.

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On November 15, the Federal Retirement Thrift Investment Board (FRTIB) which oversees the international fund, announced that it will exclude stocks listed in China and Hong Kong.

FRTIB, which manages retirement savings accounts of nearly seven million people, and assets worth over $771 billion, said the change in index was recommended by its advisers due to growing tensions between the US and China.

The fund will switch from the MSCI Europe, Australasia and Far East index to the MSCI All Country World ex-USA ex-China ex-Hong Kong Investable Market index. This shift in the benchmark is expected to lead to a significant reshuffling of $28 billion (₹2.3 lakh crore) in global equities.

"Considering the flow impact, the particular fund category, with an asset under management (AUM) of approximately $68 billion, is expected to see inflows of around $3.4-3.5 billion in 2024, spread across four reviews," Velayudhan told CNBC-TV18.

The official release does not provide detailed information on the implementation in 2024, but it is suggested that the MSCI indices will be reviewed quarterly, starting in February, May, August, and November, and Velayudhan anticipates the same schedule to be followed.

The adjustment is expected to more than double the number of countries included in the fund, leading to investments in over 5,600 stocks from 800 now, a Financial Times report stated quoting FRTIB.

India attracted funds worth $651 billion from foreign portfolio investors (FPI) in the three months ended September 2023. This is nearly 15% higher than the year-ago period, per a Morningstar report.

"So, in the overall context, let's say if India continues to outperform the other emerging markets, this will add on to the inflows in the overall scheme of things," Velayudhan noted.

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(Edited by : Shweta Mungre)