Investments via P-notes hit 13-month low of Rs 69,670 cr at Nov-end

Investments in the Indian capital market through participatory notes (P-notes) hit a 13-month low of Rs 69,670 crore till November after registering a rise in such fund infusion in the 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 after going through a due diligence process.

According to latest data available with markets regulator Sebi, the total value of investments via P-notes in the Indian markets (including equity, debt, and derivatives) declined to Rs 69,670 crore by the end of November from Rs 76,773 crore at October-end, which was the first rise in such fund infusion in four months.

The fund inflow through P-notes in November was the lowest since October 2018, when the cumulative value of such investments stood at Rs 66,587 crore

Of the total investments made till the end of November, Rs 52,749 crore was invested in equities, Rs 16,238 crore in debt and Rs 683 crore in derivatives segment.

At the end of June this year, the Indian capital market saw a total outflow of Rs 81,913 crore through P-notes, a drop from Rs 82,619 crore till May-end. At the end of July, it further declined to Rs 81,082 crore and till August-end the investment stood at Rs 79,088 crore.

The investment at September-end stood at Rs 76,611 crore and then marginally rose to Rs 76,773 crore at October-end.

In July, Sebi's board approved a proposal to rationalise the framework for issuance of P-notes.

The use of P-notes has been on a decline since 2017 and slumped to a nine-and-a-half year low of Rs 66,587 crore at the end of October last year.

In July 2017, Sebi notified stricter P-notes norms stipulating a fee of USD 1,000 that will be levied 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.