Manmohan Singh and P. Chidambaram announced yesterday that 5% of pension funds of Government employees will be invested in stocks. That’s the good news for the stock market.
Many countries allow Government pension funds to invest in stock markets. Some countries even allow those funds to invest in derivatives and all other exotic instruments. India is slowly opening up pension fund investments. As anyone could expect, communist states already started protesting this move by finance ministry.
5% of pension funds may help the market to move upwards. FIIs still have lot of influence in our market. Many people don’t accept it, they just live in an illusion. Investment from pension funds (when it really happens) will help the market move higher, as if Indian stock market is not hot enough.
As usual our government is preparing to pass the bill on this subject. As per their normal practice, they gave a weird name to this bill – Pension Fund Regulatory and Development Authority (PFRDA). If this bill is passed in parliament, you can expect more money flow into the stock market. Pension funds are expected to have the total assets of Rs. 1,00,000 crore by 2009-10 FY. That means that Rs. 5,000 crore more money would flow into the market in that financial year.
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