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Will not invest our corpus in stock markets: EPFO

Retirement fund manager Employees’ Provident Fund Organisation (EPFO) on Wednesday said that it is not considering any proposal to invest a part of its huge corpus of around Rs 6 lakh crore in stock markets.

‘We are not considering any proposal to invest in stock markets or equity at present,’ Employees' Provident Fund Organisation's Central Provident Fund Commissioner K K Jalan said. He said this in response to media reports that EPFO has no alternative but to change its investment norms to invest in equity markets.

Jalan said, ‘During the recent meeting of the EPFO's trustees, proposed pattern of investment by Finance Ministry was discussed and the Board was not in favour of investing in equities and Exchange Traded Funds (ETFs).’

However, the EPFO's apex decision making body, the Central Board of Trustees headed by the Labour Minister, had decided to recommend making the pattern more flexible to further increase the percentage of investment in government securities. The Finance Ministry has been pitching for EPFO funds to be invested in the equity markets to maximise their yields.

However, following strong opposition from unions in view of the volatile nature of stocks, EPFO did
not opt for equity investment.

The Finance Ministry had allowed the EPFO to invest up to 5 per cent of its funds in equity in 2005 and enhanced the limit to 15 per cent in 2008.

A recent notification by the Labour Ministry allows the EPFO to invest up to 5 per cent of its funds in money market instruments, including units of mutual funds and equity-linked schemes regulated by the Securities and Exchange Board of India. The EPFO has more than 5 crore subscribers across the country. It provided interest of 8.75 per cent on PF deposits in 2013-14. The EPFO trustees have recently decided to pay interest of 8.75 per cent in this financial year.

Meanwhile, the mutual fund industry is betting big on software companies as its equity exposure to the sector climbed to an all-time high of Rs 29,688 crore at the end of August. This also marks the third consecutive rise in mutual fund (MF) industry’s exposure to software stocks.

Mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

The funds’ investment in software stocks stood at Rs 29,688 crore as on August 31, 2014, accounting for 10.53 per cent of their total equity assets under management (AUM) of Rs 2.81 lakh crore, according to data with the Securities and Exchange Board of India (Sebi).

In comparison, MFs had deployed Rs 27,596 crore in the shares of software companies in July. At current levels, the MF industry has the highest exposure to software sector since August 2009. Data is not available for sector-wise exposure before August 2009, when the equity funds had deployed Rs 11,913 crore (6.71 per cent) in software shares. The previous high was in February this year when investment in the sector rose to Rs 28,784 crore.

According to market participants, MFs have been showing interest in software stocks since the beginning of the year amid rising equity market. They believe that the ongoing market rally might see mutual fund assets getting diversified.

Meanwhile, the IT index surged by 3.52 per cent, while the benchmark Sensex witnessed a gain of 2.86 per cent in August.

This year has seen a consistent growth in investment in software stocks by equity fund managers and fund infusion has grown from Rs 27,772 crore in January to Rs 29,688 crore in August.
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