P-note investments continue to drop, hit nearly 11-year low till Dec-end

Investments in the Indian capital market through participatory notes (P-notes) continue to decline and hit a nearly 11-year low of Rs 64,537 crore till the end of December 2019.

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 -- slumped to a fresh low of Rs 64,537 crore till December-end after hitting a 13-month low of Rs 69,670 crore at November-end.

The fund inflow through P-notes in December was the lowest since February 2009, when the cumulative value of such investments stood at Rs 60,948 crore, according to the data.

Of the total investments made till the end of November, Rs 52,486 crore was invested in equities, Rs 11,415 crore in debt and Rs 636 crore in the derivatives segment.

A total investment of Rs 76,773 crore was registered at the end of October. This was first gain after a continuous decline since June, the data showed.

Market experts believe that liberalised norm for foreign portfolio investors (FPIs) by the regulator Sebi is impacting investment through P-notes route.

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

Under the new rules, FPIs have been divided into two categories and around 80 per cent falls under Category-I and investors planning to set up shop as Category-I is required a simple application form. Earlier, such investors were slotted into three categories -- I, II and III.