Investment via P-notes rises to Rs 84,810 cr in Aug after 3-month decline

After three consecutive monthly declines, investment in the Indian capital markets through participatory notes rose to Rs 84,810 cr at August end on the back of a drop in oil and commodity prices

After three consecutive monthly declines, investment in the Indian capital markets through participatory notes rose to Rs 84,810 crore at the end of August on the back of a drop in oil and commodity prices.

However, the month of September might be subdued for P-note participation as the Foreign Portfolio Investors (FPIs) have turned cautious, Sonam Srivastava, Co-Founder at Wright Research, Sebi-registered research investment adviser, said.

Participatory notes (P-notes) are issued by registered FPIs to overseas investors who wish to be a part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.

According to Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets -- equity, debt, and hybrid securities -- stood at Rs 84,810 crore in August compared to Rs 75,725 crore in July-end.

In comparison, investment through the route was Rs 80,092 crore in June-end, Rs 86,706 crore in May-end and Rs 90,580 crore at the end of April.

Of the total Rs 84,810 crore invested through the route till August 2022, Rs 75,389 crore was invested in equities, Rs 9,330 crore in debt, and Rs 91 crore in hybrid securities.

In comparison, Rs 66,050 crore was invested in equities and Rs 9,592 crore in debt during July this year.

Srivastava said August was a great month for the Indian stock market. The market made a great rebound and the small and midcaps flourished. Also, FPIs invested a hefty amount in the month. The same trend was seen in the P-notes as well. The equity participation through P-notes increased, while the debt participation stayed low.

Industry experts said that the increase in investment in capital markets through P-notes in the last month is largely in line with the inflow in the emerging markets, including India.

Correction in Indian equities, and falling oil and commodity prices, especially that of steel and aluminum, were the major reasons for FPIs buying despite a strong dollar and rising bond yields, they added.

Meanwhile, FPIs pumped in a little over Rs 51,200 crore into the Indian equity markets in August, making it the highest inflow in 20 months, on the back of improvement in risk sentiment and stabilisation in oil prices. This came following a net investment of nearly Rs 5,000 crore by them in July.

The month of September has seen huge volatility in FPI flows with a total investment at over Rs 6,000 crore so far.