P-Note investments climb to 3-month high at $36 billion in Sept

Investments into domestic shares through participatory notes (P-Notes) hit a three-month high of Rs 2.22 lakh crore (about $36 billion) in September.

P-Notes are mostly used by overseas HNIs (High Networth Individuals), hedge funds and other foreign institutions, to invest in Indian markets through registered Foreign Institutional Investors (FIIs), while saving on time and costs associated with direct registration.

According to the data released by Securities and Exchange Board of India (Sebi), the total value of P-Note investments in Indian markets (equity, debt and derivatives) increased from Rs 2,11,499 crore in August to Rs 2,22,394 crore at the end of September.

This has reached highest level since June, when the cumulative value of such investments stood at Rs 2,24,248 crore.

Investment through P-Notes grew in September after declining for two successive months.

Besides, the value of P-Notes issued with derivatives as underlying, stood at Rs 1,02,224 crore at the end of last month.

The quantum of FII investments through P-Notes climbed to 10.7% last month from 10.3% in August.

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

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 a net amount of more than Rs 5,100 crore ($845 million) in the domestic equity market last month, while they poured in nearly Rs 16,000 crore ($2.6 billion) in the debt market in September.