P-Notes investment rises to 10-month high of $28-bn in Sept

Investments into Indian shares through participatory notes (P-Notes), a preferred route for HNIs and hedge funds from abroad, hit a 10-month high of Rs 1.71 lakh crore (about $28 billion) in September.

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) surged to Rs 1,71,154 crore at the end of September.

This is the highest level since November 2012, when the cumulative value of such investments stood at Rs 1.77 lakh crore.

At the end of August, foreign investments into Indian markets through P-Notes was at Rs 1.65 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

Besides, the value of P-Notes issued with derivatives as underlying, stood at Rs 1.06 lakh crore at September-end.

The quantum of FIIs investments through P-Notes marginally declined to 13.06% in September from 13.27% in the previous month.

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

The P-Notes 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, pumped in around Rs 13,000 crore ($2 billion) in the Indian equity market last month.

However, FIIs withdrew over Rs 5,600 crore ($910 million) from the debt market in September.