Indian Govt. allows Private pension funds to invest in equity market

TATrader · #1 29th January 2005, 08:35 AM

Indian Govt. allows private pension funds to invest in equity market

Is this a precursor to a bigger bull run ahead? Please discuss and post your views.

Quote:

The government has allowed non-government provident funds to invest 5 per cent of their assets in blue-chip shares.

These funds have also been allowed to invest 10 per cent in corporate debts and equity-oriented mutual funds from April 2005.

In addition, the government has relaxed the norms for superannuation and gratuity funds.

The move is aimed to provide wider avenues for investments in the wake of falling prices of government bonds.

Major reform

An official release said provident funds can have a maximum exposure of 5 per cent in gilt funds at any point of time.

PF trustees will be allowed to use at least 10 per cent of the total portfolio of government securities for active management subject to marking the portfolio on marked-to-market basis.

The government has allowed PFs to invest in term deposits of banks with a maturity period of up to three years from next fiscal as against the present norm of investing in 1-year deposits.

Also, PFs can invest in bonds of financial institutions and companies having "investment grade" from at least two credit-rating agencies.

New norms

The provident funds can invest in collateral borrowing and lending operation (CBLO) issued by Clearing Corporation of India and approved by RBI.

These three investments -- bank deposits, bonds and CBLO -- should not exceed 25 per cent of a PF's investments as against the previous limit of 30 per cent.

PFS need to park at least 25 per cent of their funds in central government securities and another 15 per cent in either state government securities or debt mutual funds approved by SEBI.

There has been no change in investment norms in these two categories.

jaideep · #2 29th January 2005, 12:24 PM

Quote:

Originally Posted by TATrader

Indian Govt. allows private pension funds to invest in equity market

Is this a precursor to a bigger bull run ahead? Please discuss and post your views.

In my humble opinion, this should augur well for the health of the Markets vis-a-vis the DFI & MF kitties will swell & provide more liquidity. About the bigger bull run ahead that you mentioned, perhaps this contribution to such an event may not be that pronounced as other factors viz. pre-budget sentiments, FII inflow, good corporate results, steadily falling inflation rate, the sudden feel-good factor among investors over the past few days etc. I however feel that FII inflow is still the strongest shoulder to the yoke of our stock markets.

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