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`Investing pension funds in stocks a positive move'

Special Correspondent

THIRUVANANTHAPURAM: The Union Finance Ministry's move to notify an interim investment pattern under the New Pension System (NPS) to facilitate the parking of 5 per cent of the pension funds in the stock market would have a positive impact on the economy of the country, according to V. Rajendran, managing director of Capstocks and Securities (India) Private Limited, a leading stock market company here.

In a statement here on Tuesday, he said the move would enhance the flow of long-term funds for the development of the nation. It would also help stabilise the markets by ensuring steady flow of funds into the stock market. Mr. Rajendran said the Government would, quite possibly, decide to increase the volume of investment from the pension funds in stock markets, after watching the impact of the present move. Now, the funds collected from new Central Government employees under the NPS came to only around Rs.1,500 crore. However, the combined pension bill of the Centre and the States would reach the level of Rs.1,00,000 crore by 2009-10, according to the Union Finance Ministry's calculations.

This would mean that, within a few years, a substantial amount would be available from the pension funds for investment in stock markets.

If the Government were to permit parking of 20 to 25 per cent of the pension funds in the stock markets, as was being done in the United States, the move would even weaken the influence of Foreign Institutional Investors in the Indian stock markets, he said.

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