Now, EPFO has more time to decide when to sell stocks
The Employees’ Provident Fund Organisation has advanced its decision-making on offloading equity to August instead of February, in a move that will help the retirement body plan liquidation of its equity investments better.
A senior government official told ET that the EPFO was so far taking a decision to offload equity in February and had less than a month to realize the capital gains basis which it declared the rate of interest on PF deposits for the concluding year.
“However, from this year onwards, we will make a decision sometime in August, so that actual offloading can happen over the next six to seven months depending on the stock market conditions,”
the official added.
EPFO offloads equity on the ‘first in, first out principle, which means the investments made in equity in the first year are offloaded in the fourth year so that the money remains invested for a longer duration and fetches better returns.
EPFO started investing in equities in 2015-16, starting with 5% in the first year, 10% in the second year, and 15% in the subsequent years. It has made a cumulative investment of ₹1.7 lakh crore, out of which over ₹22,000 crore have been redeemed till March 31, 2022.
EPFO invests up to 15% of its incremental corpus of ₹1.5 lakh crore into equity in the form of exchange-traded funds, both on the Nifty and Sensex. Its accumulated corpus stands at over ₹16 lakh crore now and it has nearly 60 million subscribers to it.
The government is of the view that to be able to give higher returns on PF deposits on a sustainable basis year after year, it is important that the retirement fund body invests more in equity as long-term returns on such investments are nearly double that on debt instruments.
