EPFO to start investing in stock markets from next month

Retirement fund body EPFO will start investing in stock markets from next month as part of its plan to put in as much as Rs 5,000 crore (Rs 50 billion) in exchange traded funds by the end of this fiscal.

"We will start investing in the exchange trade funds from next month. We have planned to invest 5 per cent of our incremental deposits in ETFs during this fiscal," Employees' Provident Fund Organisation's Central Provident Fund Commissioner K K Jalan told PTI.

"EPFO is expected to get about Rs 1 lakh crore (Rs 1 trillion) as incremental deposit during the current financial year. Thus, we would be able to invest Rs 5,000 crore in ETFs during this fiscal," he added.

A decision regarding investment in stock markets was taken at the meeting of Central Board of Trustees, the apex decision-making body of EPFO on March 31.

The Labour Ministry had given EPFO a direction through a notification on April 23 for investment of five per cent of its corpus into ETFs.

Earlier, the EPFO, which has over 6 crore subscribers, has been investing primarily in state and central government securities.

Unionists had opposed any investment in equity or equity-related instruments during the meeting of the CBT on March 31.

The new investment pattern notified on April 23 by the Labour Ministry states that EPFO will invest a minimum of 5 per cent and up to 15 per cent of incremental deposits in equity or equity-related schemes.

However, the EPFO has decided to park 5 per cent of its incremental deposits in the ETFs to start with during this fiscal.

The new investment pattern for EPFO provides that the body will invest in "shares of body corporates listed on Bombay Stock Exchange or National Stock Exchange which have market capitalisation of not less than Rs 5,000 crore as on the date of investment".

According to investment norms, the retirement fund body can also invest in units of mutual funds regulated by the Securities Exchange Board of India and which have minimum 65 per cent of their investment in shares of body corporates listed on BSE or NSE.

Illustration by Uttam Ghosh/Rediff.com