Stock investments: EPFO to watch results before hike to 15%

New Delhi: Retirement fund body EPFO will watch the result of its 5 per cent investment in stock markets this fiscal before taking a call on increasing the proportion, Labour Minister Bandaru Dattatreya today said.

"We are putting in the market approximately Rs 5,000-6,000 crore by March 2016... Depending upon the result of this, we will proceed further," Dattatreya told reporters here.

Yesterday, Minister of Finance for State Jayant Sinha expressed hope that the Employees Provident Fund Organisation (EPFO) will increase its investments in stock market from 5 per cent of its incremental deposits to 15 per cent.

Sinha was of the view that the pension funds investing in domestic equity markets would help lower volatility in equity markets and as that comes down, the cost of capital on equity side for businesses would also slide.

Asked about his views, Dattatreya said, "I have to go very cautious (on stock market investments)."

The Labour Minister is also the chairman of the trustee board of the EPFO, which started investing in equity markets last month. Primarily, the EPFO has been investing in the central and state government securities.

Labour Ministry had notified the new investment pattern for EPFO in April allowing it to invest minimum of 5 per cent and maximum of 15 per cent of its funds in equity or equity related schemes.

However, the EPFO decided to invest only 5 per cent of its incremental deposits in Exchange Traded Funds (ETFs) in the current fiscal.

During the April-June period, EPFO's monthly incremental deposit was around Rs 8,200 crore, which allows it to invest an estimated Rs 410 crore every month in ETFs during the current fiscal.

A large number of trade union representatives on board of the EPFO had opposed the move in view of the volatile nature of the stock markets.

EPFO has a subscribers' base of over four crore and is expected to receive an incremental deposits of Rs one lakh crore during the current fiscal.