NEW DELHI : Ready to begin investing in stock markets with an exchange-traded basket of PSU stocks, Rs 6.5 lakh crore retirement fund manager EPFO has tapped state-run LIC to understand the contours of the equity investments.
The Employees’ Provident Fund Organisation (EPFO) has also held discussions with the capital markets regulator Sebi in connection with the proposed investment of a part of its huge corpus in the revamped CPSE Exchange Traded Fund, which is likely to be launched in October, an EPFO official said.
The Exchange Traded Fund (ETF), which was set up in 2014, consists of shares of 10 PSUs — ONGC, GAIL, Coal India, Oil India, Indian Oil, Power Finance Corp, Container Corp, Rural Electrification Corp, Engineers India and Bharat Electronics.
The Finance Ministry is planning to launch a revamped and retail investor-friendly CPSE ETF by October wherein the government would float some additional units but the composition of stocks might remain the same.
EPFO, which has been granted permission to invest in stock markets beginning with the ETFs, has discussed with Sebi the regulations governing the equity investments.
Besides, it has held discussions with LIC in this regard as the state-run insurance behemoth has been a major investor in the equity markets for a long time and the retirement fund body wanted to understand the issues related to such investments before hitting the market, the official added.
EPFO has a corpus of about Rs 6.5 lakh crore with average annual deposit of Rs 80,000 crore, but so far it has not been allowed to invest in the stock markets due to a high level of risks attached with such investments.
However, it has been felt now that ETFs could be less riskier, especially if the constituent stocks are of PSUs.
ETF is a fund that invests in its constituent stocks, the units of an ETF are traded on the stock exchanges and can be purchased or sold by the investors like an individual stock.
Its portfolio is managed by SBI, HSBC Asset Management, Reliance Capital Asset Management, ICICI Securities Primary Dealership and UTI Asset Management Company.
The Labour Ministry has proposed an investment of 1 per cent of incremental EPFO corpus into equity and related schemes and take it gradually to 5 per cent.
The EPFO investment in the CPSE ETF could help the government on its massive disinvestment target, under which it aims to raise Rs 69,500 crore in current fiscal. This includes Rs 41,000 crore from sale of minority stake and Rs 28,500 crore from strategic stake sale.
The government had raised Rs 3,000 crore through this ETF in 2014, while it is looking to raise further funds through the revamped ETF later this year.
Under the existing scheme, retail investors have to invest a minimum of Rs 5,000 to buy units.
In his budget proposals earlier this year, Finance Minister Arun Jaitley had announced that the EPFO would invest a minimum of 5 per cent of its investable funds into equity and equity related schemes.
Such investments can go up to 15 per cent. (AGENCIES)
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