Home Economy Star state-run firms can now invest in mutual funds

Star state-run firms can now invest in mutual funds


New Delhi : In a move that is expected to give further push to the already sizzling equity markets in India, the government Thursday decided to remove the ban on star state-run companies from investing in stock markets.

Navratnas and mini-ratnas, or the gems among state-run enterprises, can now invest up to 30 percent of their surplus funds in public sector mutual funds, it was decided at a meeting of the Cabinet Committee on Economic Affairs here.

"The boards of public sector enterprises would decide the guidelines, procedures and management control systems for investment in mutual funds in consultations with their administrative ministries," an official statement said.

The meeting, presided over by Prime Minister Manmohan Singh, decided to review the decision after gaining experience for a year.

The decision was taken in order to provide a level-playing field for state-run firms, vis-à-vis the private sector, in terms of investing in stock markets and the flexibility to choose schemes based on the performance of mutual funds.

"The decision will inspire public sector undertakings for creating surpluses," said Venugopal N. Dhoot, president of the Associated Chambers of Commerce and Industry of India (Assocham), a top industry lobby.

Mutual funds have been beneficiaries when investments are made by any entity and the decision now to allow surpluses of state-run firms to be invested there will add on their savings, Dhoot added.