Investments via P-notes at 11-month low in June

Investments into Indian shares through participatory notes (P-Notes), a preferred route for high networth individuals (HNIs) and hedge funds from abroad, hit an 11-month low of Rs 1.47 lakh crore (about $25 billion) in June.

According to the latest data released by the Securities and Exchange Board of India (Sebi), the total value of P-Note investments in Indian markets (equity, debt and derivatives) declined to Rs 1,47,498 crore at the end of June after hitting a six-month high of Rs 1.68 lakh crore in May.

The June figure has reached the lowest level since July 2012, when the cumulative value of such investments stood at Rs 1.29 lakh crore. P-Notes, mostly used by overseas HNIs, hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors, while saving on time and costs associated with direct registrations.

 

Besides, the value of P-Notes issued with derivatives as underlying, was at Rs 99,763 crore at June-end.

 

The quantum of FIIs investments through P-Notes also fallen to 10.93 in June from 11.69% in the preceding 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 drivers of Indian markets, pulled-out Rs 11,027 crore (around $1.85 billion) from the Indian stock market in June.

 

Additionally, FIIs withdrew Rs 33,135 crore ($5.7 billion) from the debt market last month.