P-note investment slips to Rs 1.83 lakh cr in November

Investments into Indian shares through participatory notes (P-notes), a preferred route for high net worth individuals (HNIs) and hedge funds from abroad, slipped to Rs 1.83 lakh crore (about $29 billion) in November.

According to the latest data released by the Securities and Exchange Board of India (Sebi), the total value of P-notes investment in Indian markets (equity, debt and derivatives) declined to Rs 1,83,237 crore at the end of November after hitting two-and-a-half years high of Rs 1,83,862 crore in the preceding month.

P-Notes, mostly used by abroad HNIs, 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.

Besides, the value of P-notes issued with derivatives as underlying, stood at Rs 1.11 lakh crore at the end of November 30. The quantum of FII investments through P-notes was at 13 per cent.

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

P-notes have been accounting for 15-20 per cent of the total FII holdings in India since 2009, while it used to be much higher, in the range of 25-40 per cent, in 2008. It was as high as over 50 per cent at the peak of Indian stock market bull run for a few months in 2007.

FIIs, the key drivers of Indian markets, pumped in more than Rs 8,000 crore ($1.3 billion) in the Indian equity market last month. However, they withdrew over Rs 5,900 crore ($957 million) from the debt market in November.