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Rs 130 bn may come to markets - Views on News from Equitymaster
 
 
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  • Sep 4, 2009

    Rs 130 bn may come to markets

    As per a leading business daily, the Employees Provident Fund Organisation (EPFO) is evaluating options to park around 3% to 5% of its Rs 2.6 trillion retirement fund in stock markets. It may be noted that EPFO has so far never invested in the stock markets and if the proposal is approved, it could bring in funds to the tune of about Rs 130 bn. The EPFO is considering options such as equity linked index funds as returns from fixed-income products are likely to prove insufficient in providing protection against inflation for its 45 m depositors.

    This development must be seen in the background of the finance ministry's earlier proposal to park 15% of the EPFO funds in stock markets. The proposal faced strong opposition from several quarters. The ministry has now suggested this lower allocation for investment in equities. It remains to be seen whether this new proposal will be accepted.

    In our opinion, it is high time Indian retirement funds invested in stock markets especially given their genuinely long term investment horizons. Good businesses provide protection from inflation and so do equity investments in them. The EPFO should adopt sensible strategy for long term investment in stocks and leave behind its extreme aversion to equities.

    Drought kindles food storage efforts
    Monsoons this year have been a cause for concern for the food ministry. And it is now showing, thankfully. As per a leading business daily, the government plans to attract private sector investments to the tune of about Rs 50 bn to build food storage capacity. It is aiming at building 12.6 m tonnes of food storage facilities in FY10. In fact, the Food Corporation of India will float a tender this month. The government has guaranteed that it will store grains in these new facilities for 5 years, thus assuring sustainable revenue to the private parties.

    The development comes at a time when a large quantity of food grains procured by the government is lying in the open due to a lack of storage facilities. In our opinion, this is a positive move. The better storage infrastructure would not only mean preservation of food grains for later usage but also minimal wastage.

     

     

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