The continuous shift in global stock markets from emerging markets to the US, known as the “Trump trade,” has led to a significant decline in annual returns on equity investments in the National Pension System (NPS). According to the latest data from the Pension Fund Regulatory and Development Authority (PFRDA), NPS annual returns on equity investments have dropped to 10.89 per cent as of February 1.
The decline in benchmarks, driven by weak corporate earnings in Q2 and Q3 amid slowing economic growth, has resulted in a more than 10 per cent drop in NPS returns since late September. This marks a sharp fall from the nearly 40 per cent annual return recorded on September 28 when Indian equity indices reached an all-time high.
Foreign portfolio investors (FPIs) have been net sellers of about $10 billion in equities this calendar year. Both the Sensex and Nifty50 have fallen over 10 per cent from their record highs in September, causing concern among investors.
The overall growth pace of NPS assets under management (AUM) has moderated to 23.33 per cent year on year at ₹13.88 lakh crore. This is lower than the 25.49 per cent year-on-year growth recorded as of December 28. The NPS assets AUM grew by 27.34 per cent on a year-on-year basis as of December 14.
Prior to October 2024, NPS monies invested in pure equities had seen returns as high as 40 per cent. Since its inception, NPS has generated competitive returns, with different schemes offering varying returns for government and non-government sectors.
The private sector NPS assets growth has also moderated to a year-on-year increase of 29.90 per cent at ₹2.78 lakh crore as of February 1. This growth rate is lower than the previous months but still higher than the government sector’s growth.
Corporate sector-related NPS has shown robust growth in AUM, with the ‘All Citizen Model’ assets growing by 26 per cent to ₹70,144 crore. The number of subscribers in the corporate sector and ‘All Citizen Model’ has also increased significantly.
Overall, the NPS continues to provide competitive returns, although the recent market volatility has impacted annual returns on equity investments. The government and private sector NPS assets are showing steady growth, indicating the resilience of the pension system in challenging market conditions.
