It takes years to build a decent retirement savings and seconds to gamble it away, but only providence seems to have saved crores of rupees of Employees Provident Fund that the government was planning to invest in the capital market.
If not for the indecisiveness of the authorities, the EPF Organisation would have already diverted five per cent of its investments and lost a huge amount in the current bear market.
For the purpose of analysis, if the EPFO had invested Rs 8,300 crore (Rs 83 billion) -- five per cent of its total investment of Rs 1,66,106.48 crore (Rs 1661.06 billion) -- it would have lost over Rs 2,000 crore (Rs 20 billion) since May 11 when the downslide began.
The government had first mooted the idea of tapping the stock market last year, attracted by the huge returns from equities and in the face of decline in traditional investment instruments. It had also appointed a global consultant to advice it on the move.
Of EPFO's total investments, 32.2 per cent is parked in the Special Deposit Scheme that yields an interest of 8 per cent, which is much less compared to returns from equities.
But given the bear market, the EPFO might have lost more than Rs 2,000 crore in less than one month -- a period during which the market tumbled from a high of 12,671 points (May 11) to 9,200 levels today.
"We have opposed investment in equities. We are only for time-bound returns and investment in equities does not fall in that category," CITU secretary Tapan Sen told PTI.
He said the unions would not accept investments that do not guarantee returns to EPFO's four crore subscribers.
The EPFO board is likely to meet this month to decide on rate of returns for 2006-07 and on investing in equities.
EPFO's plan to tap the market was aimed at attracting more investors while offering them better returns than the current rate of 8.5 per cent.
Sources, however, said that a decision on equity markets could be delayed given the recent downslide in the market that has caused a fall of nearly 25 per cent in the benchmark Sensex.
Some market observers also consider the delay in reaching a decision as a boon in disguise for the salaried class, as they might have lost a big fortune if the EPFO had already gone ahead with the proposal.
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