As markets shake and stir, NPS investors opt for bond of trust
National Pension Scheme (NPS) is pouring funds into government securities, with the pace of bond investments being driven not only by state employees' default retirement plans but also a potential reduction in risk appetite for equities amidst steep valuations and higher interest rates.
Latest data published by the Reserve Bank of India showed that the ownership of government bonds by pension funds was at a high of 4.32% of the outstanding stock of ₹103 lakh crore, or ₹4.48 lakh crore, in the quarter ended September. In the quarter ended March 2023, the ownership of government bonds by pension funds was at 3.50% of outstanding stock or ₹2.98 lakh crore.
According to pension fund managers, the ownership of government bonds by pension funds can be broadly taken as a proxy for NPS investments in debt.
The figures at the end of September are equivalent to roughly 44% of the ₹10.22 lakh crore worth of overall assets under management (AUM) of the NPS for FY24 as of November 30, data from the NPS Trust showed.
Last financial year, the growth in ownership of government bonds outstripped the growth in total NPS AUM.
«It is correct to surmise that out of a total AUM of close to ₹11 lakh crore, around ₹4.5 lakh crore is in government bonds for the overall NPS. Total NPS AUM is around ₹10.5 lakh crore including the Atal Pension Yojana which is ₹32,000 crore,» said Sumit Mohindra, CEO of ICICI Prudential Pension Fund Management.
«Total NPS AUM grew by 22% from ₹7.36 lakh crore in FY22 to ₹8.98 lakh crore in FY23, equity grew by 22%, corporate bonds by 23% and government bonds by 25%,» he said.
ICICI Prudential Pension Fund Management is one of the pension funds registered under the NPS along with nine other pension fund
