The S. A. Dave Committee set up to frame guidelines on investments by pension and insurance funds in equities is considering to allow investments in index funds. This was reported by a leading financial daily.

The entry of private pension funds seems a certainty once the Insurance Bill is passed by the Parliament. The committee has recommended that pension/insurance funds should for the first few years must invest in Index funds, before they mature into investing in equities. It has suggested that these funds should be regulated by the Securities and Exchange Board of India (SEBI), which is the regulator of for mutual funds in the country.

World over pension funds constitute one of the key elements in fund mobilisation. Once pension/insurance funds are set up in the country, more retail investors will be able to participate in mutual funds (MF). This will add a lot of depth in the market and will improve mutual fund penetration dramatically.

If the Bhartiya Janata Party (BJP) comes to power (which seems quite certain now), the Insurance Bill is expected to be passed without any hitches. With the liberalisation of the insurance sector, foreign insurance companies will be able to launch mutual fund products, which will see more inflows in the MF segment. With their expertise in asset management, they will vie with established MFs on an even keel. All this can only be good for the investor who will have a range of products to choose from.

Add Comments