O J's Corner : Reflections

Think twice before
investing in shares

Government departments and agencies should think twice before investing public money in the highly volatile share market.

The recent “great fall” in the share market, which enabled interested players to gobble up roughly Rs two lakh crore from ordinary investors, should be an eye-opener to all concerned about pumping  money from the Postal Department, the Employees Provident Fund Organisation, Insurance agencies etc into this black hole.

Once the money is gone, no one is going to replenish it to the loser, who will again be tempted to tinker with the seed money and cause further loss. It is true, in the money melee, some would fetch a fortune. But no one has the right to meddle with the hard-earned money of ordinary workers, government employees, house-wives and retired hands.

The lucre of quick money would play foul with the future of ordinary mortals.

In this context, let us take a look at the stance of the left political persuasions.

The left parties are insisting on payment of 9.5 per cent interest to the EPF subscribers.

On a temporary basis this looks all right, but the maximum interest rate that the EPF fetches for its investment is only 8 per cent.

The gap is becoming wider with the interest rates going down further in new investments.

It is in such circumstances that those who argue for investing in share market to fetch quick money enter the fray and spoil the situation.

Mind you, the foreign sharks are avidly watching every move to fleece the share market. They can afford to pump in hell of a hefty amount of money into our domestic market, exaggerate the winnability by ballooning the prospects on and on until the bubble breaks. But just before the devastation, they get away with the booty.

When banks are paying negligible amount of interest to their depositors, no one should expect incomparably higher rates from EPF, Postal insurance and the like. If you insist on getting the unthinkable, they will go in such betting and make you the ultimate loser.

In fact, on February 2,  2005, the Central Government increased the EPF interest rate for employees from 8.5 per cent to 9.5 per cent at the insistence of the left parties.

Again, the EPFO board would meet early in June to decide about the interest rate for 2006-2007 as well as prospects for investing in the equity market.

EPFO has investments of Rs 1,66,106.48 crore, of which five per cent is being considered for investment in the equity market. Let us hope this will not go into the drains.