P-notes investment in Indian markets climbs to Rs 792 bn in November

Investments in the Indian capital market through participatory notes climbed to Rs 792.47 billion in November after hitting a nine-and-a-half year low at the end of preceding month.

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 total value of P-note investments in Indian markets equity, debt, and derivatives rose to Rs 792.47 billion till November-end from Rs 665.87 billion at October-end.

In September, the value of P-note investments was Rs 795.48 billion.

As per the data, the fund inflow through P-notes in October this year was the lowest since March 2009, when the cumulative value of such investments stood at Rs 694.45 billion.

Of the total investments made last month, P-note holdings in equities were at Rs 629.71 billion, while the remaining was in debt and derivatives markets.

The quantum of FPI investments via P-notes rose to 2.5 per cent (month-on-month) during the period under review from 2.2 per cent in the preceding month.

P-note investments were on a decline since June last year and hit an over eight-year low in September 2017. This drop in investment trend continued till 2018, however, rose slightly in August and again dropped in September and October.

In July 2017, Sebi had notified stricter norms stipulating a fee of $1,000 on each instrument to check any misuse for channelising black money. It had also prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes.

Marketmen feel that FPIs have stamped their influence very strongly this year after their stiff resistance to proposed changes in norms for recording beneficiary ownership of their funds forced regulators to have a re-think and eventually change the rules.

Earlier this month, capital markets regulator relaxed norms for clubbing of investment limits by well regulated foreign investors.