Equities outshine bonds NPS funds ride the bull as 1-year equity returns soar to 34.27%

Bullish equity markets have helped pension funds record a scorching average annual return of 34.27 percent as of March 1, surpassing corporate bonds by over fourfold, and outperforming government securities and State government schemes, latest PFRDA data showed.

Over the past three years, pension funds achieved an average return of 17.7 percent in equities, with returns since the inception of National Pension System (NPS) coming in at 13.56 percent for equity investments.

As of March 1 this year, corporate bonds recorded an annual return of 8.48 percent, while the government securities saw a return of 10.5 percent. The annual return from Central and State government schemes stood at 12.71 and 12.67 percent, respectively, data showed.

As of March 2 this year, assets of NPS, including Atal Pension Yojana (APY), grew by 30 percent year-on-year (YoY), reaching ₹11.50-lakh crore. Of this, equity allocations totalled ₹2.1-lakh crore. 

PFRDA Chairman Deepak Mohanty had recently expressed confidence that NPS assets will touch ₹12-lakh crore by end March 2024.

The latest strong show on equity returns comes at a time when several brokerage houses, including foreign ones such as Jefferies are bullish about the growth prospects of the economy and foresee sharp surge in Indian equities for the coming decade. 

India’s market capitalisation, which is currently the 5th largest globally ($4.5 trillion), is expected to touch $10 trillion mark by 2030, said a recent Jefferies’ note. .

Also read: This women’s day, here’s why you should start saving differently than men

Kotak Investment Advisors said in a recent market update and strategy note for March 2024 that India’s growth recovery and resilience are now reflected in the Nifty’s 12-month forward valuation of 20.3X and the INR’s remarkable resilience, marked by the lowest volatility in several decades.

“We continue to expect the Nifty to trade around a 20x 12-month forward PE ratio. With a March 2026 EPS of ₹1,200, we continue to expect high single digit returns for the Nifty index in the next 12 months,” the Kotak Investment Advisors note added.

SUBSCRIBER BASE RISES

The robust growth in NPS assets was aided by strong show on the ‘corporate’ and ‘all citizens model’ categories. So far this fiscal up to March 1, as many as 7.92 lakh new subscribers have joined NPS.

While all-citizens model saw 6.69 lakh new subscribers, corporate model saw 1.23 lakh new subscribers. 

PFRDA is hopeful of taking the new subscribers level to at least a million by end March 2024 although it has internally targeted addition of 13 lakh new subscribers this fiscal.

Last fiscal year, PFRDA had added a million new subscribers.

Also read: The great Indian retirement challenge

The total number of NPS and APY subscribers as of March 2 this year stood at 7.25 crore, up 16 per cent over 6.25 crore in year ago period.

NPS took six years and six months to reach the milestone of ₹ 1-lakh crore AUM after its implementation in the year 2009. It then took 4 years and 11 months to further increase AUM to ₹5-lakh crore.  

NPS AUM had doubled to ₹10-lakh crore as of August 25 last year from ₹5-lakh crore in a span of just 2 years and ten months.



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