P-notes investment in capital market climbs to Rs 62,138 cr till June

Investments through participatory notes (P-notes) in the domestic capital market surged to Rs 62,138 crore till June-end, making it the third consecutive monthly rise.

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

According to Sebi data, the value of P-note investments in Indian markets -- equity, debt, hybrid securities and derivatives -- stood at Rs 62,138crore until June, while the same was at Rs 60,027 crore at the end of May.

Prior to that, investment level was at Rs 57,100 crore at the end of April.

The investment level had fallen to an over 15-year-low of Rs 48,006 crore at the end of March.

The figure at March-end was the lowest level of investment since October 2004, when the total value of P-note investments in the Indian markets stood at Rs 44,586 crore.

The lower figure in March came amid significant volatility in broader markets on concerns over the coronavirus-triggered crisis.

Of the total Rs 62,138 crore invested through the route till June, Rs 52,171 crore was invested in equities, Rs 9,572 crore in debt, Rs 231 crore in the hybrid securities and Rs 164 crore in the derivatives segment.

Fund inflow through the route stood at Rs 68,862 crore, Rs 67,281 crore and 64,537 crore at the end of February 2020, January 2020 and December 2019, respectively. However, it was at Rs 69,670 crore at November-end last year.

Market experts said that P-note is now not a preferred route for investing in India after Sebi made registration process easier for FPIs. However, due to certain taxation laws in India, FPIs still want to explore this route.

Earlier in September, the Securities and Exchange Board of India (Sebi) simplified know-your-customer (KYC) requirements and registration process for FPIs. Besides, the regulator broad-based the classification of such investors.

Meanwhile, FPIs pumped in a net sum of Rs 26,000 crore in the capital markets(equity and debt) in June after pulling out Rs 7,355 crore in May.