The Employees’ Provident Fund Organisation (EPFO) has recently announced that it will invest Rs18,000 crore in stocks in the current financial year. The news was broken down by the Labour minister Bandaru Dattatreya in New Delhi on Monday. He said that his ministry is positive on more equity exposure because of the “encouraging returns” it has received this year.
EPFO which functions under the Union Labour ministry started investing in stocks in 2015 investing 5% of the incremental corpus in the year 2015-16. In the next year, it doubled down the investment which then stood at 10% of the annual incremental corpus.
Dattatreya told the reporters that they are hoping to make a decision in the meeting which will be held on 27th May. The trustee’s members couldn’t reach any conclusion on hiking the equity exposure to 15% when the meeting was arranged in April. However, the minister is certain that a decision will be made this time around.
Founder chairman of Prime Database Prithvi Haldea said that there is a word of caution for everyone, EPFO included as currently, the market is at a very high level. According to him, there are two theories, one of which believes that there is still a lot of steam left in the market and so investing in it could be beneficial and the other which thinks that the market has reached its saturation point and there is high demand and low supply. Mr. Prithvi Haldea himself acknowledges himself to be in the second category.
Dattatreya remains confident on investing 15% of the corpus and has said that it is the right time to increase it from 10% to 15%. So far the retirement fund manager has invested Rs18,600 crore via ETFs through SBI mutual funds. The minister said that so far the return has been very good amounting to an excess of 13%. He emphasized that it is higher than what they got from investing in debt instruments which was around 8.5%.
D.L. Sachdeva, national secretary of All India Trade Union Congress said that the EPFO doesn’t have any exit policy without which it could be very dangerous to invest this amount of money into the market.