The Investment Committee (IC) of the EPFO, which manages assets worth ₹31 trillion, is expected to examine the available options at an upcoming meeting on February 10. The panel will also assess the feasibility of investing in emerging ‘sunrise’ sectors like rare earths, railways and defence, according to sources aware of the development. At the panel’s last meeting in December 2025, CRISIL was also asked to present an analysis on the potential for investments using the ESG (Environment, Social and Governance) criteria.
EPFO’s equity investments now account for 10.57 per cent of its overall portfolio, as of December 31, 2025.
This is not the first time the administrator of retirement savings of the formal workforce is planning such a diversification of its stocks’ portfolio beyond the top two indices — a similar endeavor initiated in 2016 did not fructify. At the time, an expert panel set up by the EPFO, that included representatives from the LIC of India and National Institute of Securities Markets, had suggested that additional investments be made in the BSE and NSE Next 50 indices as well as the BSE Midcap Select Index.
The latest initiative was kicked off in November 2024, when the IC asked EPFO’s consultant, CRISIL, to study diversification options afresh. The consultant was asked to analyse the market size of various indices and their volatility levels as well as their risk-adjusted returns’ profile.
CRISIL has presented a list of potential sectoral and factor- and style-based indices with active ETFs present in the market, for diversification of the EPFO’s equity exposure. Some of the sectoral indices include those tracking Banking and Financial Services, Information Technology, Global Indices, FMCG, Defence, Railways, and Services.
Following the IC's nudge to explore ESG and new sectors like rare earths, CRISIL has also included the Nifty EV and New Age Automotive index, the Nifty 100 ESG Sector Leaders index and the Nifty India Defence index.
CRISIL also identified factor-based and style-driven indices such as those tracking momentum stocks, value stocks, low volatility stocks or ETFs that track other indices but use equal weights for all constituents. It has ranked some of them on the basis of their Sharpe Ratio, which measures an investment's return relative to its risk.
Separately, the EPFO is also considering adopting a new benchmark to assess the performance of EPFO's debt portfolio, which constitute over 89 per cent of its total investments. Crisil has proposed separate benchmarks for the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS), as the latter has a substantially longer investment horizon.
At the last meeting of the investment panel, members asked if the current methodology for the benchmark used to measure portfolio managers’ performance is inadequate. It is learnt that Crisil said that there is a need to nuance the benchmark based on the different scheme objectives. Moreover, the current benchmarks were mostly being outperformed by EPFO’s portfolio managers, so a new benchmark methodology would better serve the retirement fund’s interests, the firm said.
Earlier, the Reserve Bank of India, in a report on EPFO’s fund management and investment related matters, had mooted that it adopt a separate pattern of investment and benchmarks for its different schemes. Apart from the EPF and the EPS, the EPFO also manages an insurance scheme called Employees’ Deposit-Linked Insurance. The EPFO covers all Indian workers employed in firms with 20 employees or more, earning upto ₹15,000 a month.
 "EPFO")