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Our Bureau

`Will improve liquidity, serve as hedge against inflation'

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Mumbai Jan. 22 Stock market and mutual fund experts welcomed the Finance Minister's proposal allowing investment of a portion of the pension fund under the New Pension Fund Scheme in the stock markets. Experts said it would help enhance liquidity in equity markets.

"The liquidity will be useful as a counter balancing force to the foreign institutional money. The strengthening of the domestic market will help the economy," said Mr E. Prasanth Prabhakaran, Senior Vice-President, Kotak Securities.

Industry sources said the long-term pension funds would benefit fundamentally sound companies. "It will create a lot of demand for value stocks," said Mr A. Rama Mohan Rao, Managing Director, UTI Securities.

Mutual fund managers suggested the industry could develop pension schemes for managing this corpus. "Once the Government allows larger investment in stock markets, new schemes from mutual funds which invest 0-20 per cent in equity and the remaining in debt can be evolved," said Mr Mugunthan Siva, Chief Investment Officer, Optimix.

Mutual funds will be in a position to invest this money through systematic investment plans, said Mr A. Balasubramanian, Chief Investment Officer, Birla Sun Life Mutual Fund.

The FIIs said the move is expected as globally this phenomenon is common. "We expect more amounts from pension funds to come into the equity markets. India is a sunrise industry and this will help the investors and pensioners to get educated on the stock markets," said Mr Rajen Doshi, Country Head - India, Nikko AM, which has a registered FII in the country.

The long-term investment will help as a hedge against inflation, said Mr Rajeev Anand, Chief Investment Officer, Standard Chartered Mutual Fund. The increased investment may not help reduce volatility as stock markets react to different flows daily, he added.

Markets end higher

Stock markets ended higher amid high volatile sessions with both BSE-30 Sensex and NSE S&P CNX Nifty index moving alternately in the green and red zone. Dealers said this movement was on the absence of a particular trigger to drive the markets.

"Investors have been unable to take a specific call as the impact of the quarterly results has already been factored in the markets," said a dealer. He added, "Markets went down in anticipation of a possible rate hike announcement in the Credit Policy meet next week."

The BSE-30 Sensex ended 26.53 points or 0.19 per cent higher to close at 14,209.24 points. The NSE S&P CNX Nifty closed at 4102.45 points, up 0.3 per cent.

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