EPFO hits stock market through ETF route today

Retirement fund body EPFO kickstarts the process of investing in the stock market on Thursday with an initial corpus of around Rs 5,000 crore through ETFs in the current fiscal.

"We are making our first investment in equity (market) on August 6 in Mumbai," EPFO's Central Provident Fund Commissioner K K Jalan said.

Labour minister Bandaru Dattatreya said that state provident funds will invest via SBI Nifty exchange-traded fund (ETF) and SBI Sensex ETF.

The Ministry had notified new investment pattern for Employees' Provident Fund Organsiation (EPFO) in April allowing the body to invest minimum of 5 per cent and up to 15 per cent of its funds in equity or equity related schemes.

However, the EPFO management has decided to invest 5 per cent 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 per cent (of incremental deposits) but CBT allows me to invest 5 per cent (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 per cent of incremental market (deposit)... even if we invest Rs 6,000 crore as you say that is even less than 1 per cent 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.