The Employees' Provident Fund Organisation (EPFO) has cut back on its investments in equities and bonds in the past five weeks.
This is owing to a drop in contributions to the corpus and a rise in claims due to abrupt disruptions in salary incomes in the wake of coronavirus-induced lockdown countrywide.
EPFO, which is India's biggest debt investor, is estimated to have halved its portfolio to around Rs 5,000 crore since May, a source told the Economic Times.
The fund invested over Rs 4,000 crore in May alone when compared to an average of Rs 8,000-9000 crore it used to put in every month before lockdown.
Equities are bearing the brunt as contributions to the EPFO fall which in turn is becoming more risk-averse.
All this, coupled with the incertitude of second wave of coronavirus infections across the country and likely financial stress for companies, has exacerbated the situation further.
"Majority of its investments are in bonds as it has reduced the share of equity investments," the source told the news daily.
EPFO, which is required to invest up to 15% of its corpus into the equity market may have lowered its share of exposure to 10% in the wake of looming economic uncertainties.
Meanwhile, the retirement body has also slashed its demand for corporate bonds. Even after the Reserve Bank of India (RBI) cut repo rate by 40 basis points (bps) on May 22, the differential between benchmark bond yields and blue-chip public and private sector companies continues to be in the range of 80-90 bps, as it was before the rate reductions.
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