Investments via P-Notes slip to $27 bn in March

The March's figure was lower than the total investments of Rs 1.64 lakh cr in February and Rs 1.62 lakh cr in January

Foreign investments into Indian markets through participatory notes (P-Notes), a preferred route for high net worth individual and hedge funds, declined to Rs 1.48 lakh crore (about $27 billion) in March.

According to the latest data released by the Securities and Exchange Board of India (Sebi), the cumulative value of P-Note investments in Indian markets (equity, debt and derivatives) was at Rs 1,47,905 crore at the end of March.

The figure for March was lower than the total investments of Rs 1.64 lakh crore in February and Rs 1.62 lakh crore in January. At the end of March 2012, investment by rich entities abroad in India through P-Notes stood at Rs 1.66 lakh crore.
 

P-Notes, mostly used by overseas HNIs (High Networth Individuals), hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors (FIIs), while saving on time and costs associated with direct registrations.

Notably, investments into Indian shares through P-Notes was at Rs 1.77 lakh crore in November and Rs 1.75 lakh crore in October on government's policy reform measures and initiatives to address tax-related issues.

Besides, the value of P-Notes issued with derivatives as underlying, was at Rs 1.04 lakh crore at March-end.

The quantum of FIIs investments through P-Notes decreased to 11.07% in March from a six-month high of 12.33% in the previous month.

Till a few year-ago, the P-Notes used to account for more than 50% of total FII investments, but their share has fallen after Sebi tightened disclosure and other regulations for such investments.

The PNs have been accounting for mostly 15-20% of total FII holdings in India since 2009, while it used to be much higher, in the range of 25-40%, in 2008.

It was as high as over 50% at the peak of Indian stock market bull run during a few months in 2007.

FIIs, the key driver of Indian markets, was at a record Rs 1.4 lakh crore ($26 billion) in the Indian stock market in 2012-13, the highest ever since overseas entities started investing in the country.

Additionally, FIIs also infused Rs 28,334 crore in the debt market during the previous fiscal.