EPFO to now take decision on selling of stocks in August of the year

13 Jul 2022 , 10:04 AM

In an effort to improve the retirement body plan’s ability to liquidate its equity assets, the Employees’ Provident Fund Organization has pushed its decision-making on selling stocks to August from February.

Senior government officials told ET that the EPFO was now deciding whether to sell stock in February and that it had less than a month to realize the capital gains on which it had set the rate of interest on PF deposits for the ensuing year.

However, the source continued, “going forward, we will make a decision sometime in August, allowing for real unloading to take place over the following six to seven months, depending on stock market circumstances.

In order to keep the money invested for a longer period of time and earn higher returns, EPFO offloads equity according to the “first in, first out” approach. This implies that investments made in equity in that are made first will also be sold first.

Beginning with 5 percent in the first year, 10 percent in the second year, and 15 percent in the following years, EPFO began investing in stocks in 2015—16. Over $22,000 crore of its total investments, totaling 1.7 lakh crore, had been redeemed as of March 31, 2022.

EPFO invests up to 15% of an additional 1.5 lakh crore in equities through exchange-traded funds that trade on both the Nifty and Sensex. It currently has around 60 million customers and its total corpus is above 16 lakh crore.

The government is of the opinion that since long-term returns on equity investments are roughly twice as high as those on debt instruments, it is crucial that the retirement fund body invest more in them if it hopes to offer larger returns on PF deposits consistently year after year.