The country's state pension fund EPFO plans to buy nearly $800 million in stocks this fiscal year, its commissioner said on Thursday, below expectations and signalling a cautious stance towards the first equity investments in its 64-year-old history.

The Employees' Provident Fund Organisation (EPFO) will allocate Rs 5,000 crore ($784 million) in the year to March 2016 for exchange traded funds that track the country's two main share indexes, but could increase that to as much as Rs 7,000-8,000 crore, the fund's commissioner, KK Jalan, told reporters.

"Since this is our first investment in equities we have decided to invest through the ETF route since that reduces the risk," Jalan said.

Investors had welcomed the pension fund's decision this year to begin buying stocks in 2015/16, hoping it would become, like state-run Life Insurance Corp of India, a steady source of funds especially in times of market turbulence.

Analysts were disappointed at the initial amount.

"The Government needs to increase its investment into equities," said G. Chokkalingam, founder of Equinomics, a research and fund advisory firm.

The amount is only a fraction of the Rs 47,000 crore that Life Insurance Corp invested in stocks in the year to March 2015.

EPFO has Rs 8.5 lakh crore under management, most of it invested in government bonds. It had previously announced it would allocate up to 5 per cent of funds from new pension contributions and maturing investments into equities.

Jalan said the fund could increase that proportion to 10 per cent next fiscal year and consider investing in other ETFs.

"We will see how this goes and we hope to increase our equity investments," Jalan said.

Three-quarters of the amount will be put into an exchange traded fund tracking the 50-share NSE index while the remainder will go to an ETF tracking the 30-share BSE index . Both funds will be run by State Bank of India's asset management unit.

Indian shares were Asia's second-best performers in dollar terms last year but have retreated after hitting record highs in March, as investors grew disappointed with the slow pace of economic reforms from the 15-month-old government of Prime Minister Narendra Modi.

The NSE index is still up 3.7 per cent this year, while the BSE is up 2.9 per cent.