New corridor: EPFO to hit stock market through ETF route on 6 August

New Delhi: Retirement fund body EPFO will kickstart the process of investing in the stock market on 6 August with an initial corpus of around Rs 5,000 crore to be invested through ETFs in the current fiscal.[caption id=“attachment_2373404” align=“alignleft” width=“380”] New zone for EPFO. Reuters[/caption] “We are making our first investment in equity (market) on 6 August in Mumbai. The Labour Minister (Bandaru Dattatreya) will preside over the function,” EPFO’s Central Provident Fund Commissioner KK Jalan said while addressing an Assocham conference in New Delhi. Labour ministry had notified new investment pattern for Employees’ Provident Fund Organsiation (EPFO) in April allowing the body to invest minimum of 5 percent and up to 15 percent of its funds in equity or equity related schemes. However, the EPFO management has decided to invest 5 percent of its incremental deposits in ETFs only during the current fiscal. On the size of investment, Jalan said, “I also don’t know. It depends upon the market. Finance ministry norms allow me to invest up to 15 percent (of incremental deposits) but CBT allows me to invest 5 percent (in ETFs) to start with.” During the April-June period, EPFO’s monthly incremental deposit was around Rs 8,200 crore. Thus it will have around Rs 410 crore at its disposal to invest in ETFs every month. “We are a long-term player and in long-term equity market behaves in a positive manner. They (equity) have always given a positive return (in long-term),” Jalan said. “But risk element of equity going down is always there. That risk element is very very less because it is only 5 percent of incremental market (deposit)… even if we invest Rs 6,000 crore as you say that is even less than 1 percent of our corpus (Rs 6.5 lakh crore),” he said. SBI Mutual Funds has been roped in by the EPFO to help the body for its investments in the ETFs and understand the dynamics of the stock market. EPFO has not invested in equity markets so far. Some of the trade union members on the board of EPFO’s apex decision making body Central Board Of Trustees (CBT) have been opposing the decision to park funds in volatile stock market. PTI