SEBI chief pitches for pension funds investing in equity

The SEBI Chairman, Mr U. K. Sinha, on Thursday prescribed a possible remedy to boost retail investor participation in the stock market.

Deployment of pension funds (like employees provident fund) in equities should not be dictated by regulation but by investor preference on whether one wants to take an exposure in equity or not, said the SEBI chief at a seminar on inclusive growth.

Domestic pension funds being huge in size and long term in nature have the wherewithal to act as a counterbalance to FII flows, he observed. “Why should the law forbid investment in any particular asset class, if an individual is fine with it?” he asked. India is the perhaps only country where domestic pension funds do not invest in equity, he added.

Expressing concern over the fact that only 2.6 per cent of the total financial assets in India were deployed in the capital market, he said that SEBI would do what it takes to make the investor feel that the capital market is not a hotbed of speculation.

“SEBI has started tightening surveillance so that it acts as a deterrent to market misconduct,” he said.

SEBI has also started removing bottlenecks and irritants in processes (so that they become user-friendly) and plans to launch a massive investor education and literacy campaign shortly.

Fiscal deficit and inflation

All policy action, including containing subsidies at the budgeted levels, needs to be taken in order to control fiscal deficit and tame inflation, said Dr C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister.

Though it is a difficult target, the Government is committed to maintaining fiscal deficit at 4.5 per cent of GDP in the current fiscal, as has been projected in the annual budget, he said.

While some action has been taken by the oil marketing companies by increasing prices of petrol, some action is still called for, he added.

When asked about a further hike in fuel prices, he said it may be done soon.

Dr Rangarajan also said that all policy measures must be used to bring down the current level of inflation and re-anchor inflationary expectations to the comfort zone of 4-5 per cent.

If inflation continues to remain at high levels, then probably the Reserve Bank of India may continue to take a tough stance in terms of raising interest rates. But taking action on inflation will not necessarily affect growth, Dr Rangarajan said.

“We need to look at growth in the medium term. It requires low level of inflation,'' he said. This fiscal, inflation is likely to come down to 6.5 per cent, he added.

COMMENT NOW