India plans to raise cap on equity investments by state pension fund

New Delhi: India plans to lift the cap on equity investments made by the state pension fund to 15 per cent from 5 per cent, Minister of State for Finance Jayant Sinha said on Thursday.

Jayant Sinha told a conference that the government is aiming to stabilise domestic equity markets by allowing greater investment by pension funds, which are typically long-term investors. The EPFO manages $100 billion in savings that are now mainly invested in government bonds paying a fixed rate of interest.

Last week, the regulator of another, smaller, state pension fund said the government may raise its cap on equity investments on behalf of government workers to 50 per cent of assets under management. The sums involved are small in relation to the $1.5 trillion market value of the Bombay Stock Exchange, but could grow quickly as Prime Minister Narendra Modi seeks to broaden India's tiny pensions net to cover more workers.