Days after finance minister P Chidambaram promised to take more steps to revive the capital market, his ministry on Wednesday urged pension and insurance funds, including the Employees’ Provident Fund Organisation (EPFO) to review and enhance their exposure to equity markets.
Sources said that a finance ministry meeting on Wednesday discussed that insurance companies and pension funds should use the full equity investment window while the risk averse EPFO, with a Rs 5 lakh crore corpus, should also consider investing in the capital market.
The move comes at a time when the finance ministry is also considering a proposals to hike the equity exposure for pension funds to 25 per cent from the current 15 per cent ceiling, as well as to permit insurance companies to hold as much as 25 per cent stake in a single company. Under current IRDA norms, insurance companies have a threshold of 10 per cent exposure to a single firm’s equity.
Any action by insurance and pension funds which collectively manage assets of over Rs 20 lakh crore would bring cheer to the depressed stock markets that in recent months have seen a flight of investors in the back of the debt crisis in much of the developed world as well as policy uncertainty in India.