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P-notes investment rises to Rs 1.31 lakh cr in October

P-note investments were on a decline since June and hit over eight-year low in September

Press Trust of India  |  New Delhi 

The many premature obituaries of P-notes

in the Indian capital market through participatory notes (P-notes) climbed to Rs 1.31 lakh crore at October-end after hitting an over eight- year low in the preceding month.

P-notes are issued by registered foreign portfolio investors to overseas players who wish to be part of the Indian without registering themselves directly. They, however, need to go through due diligence.

The total value of P-notes investment in Indian - equity, debt and derivatives - rose to Rs 1,31,006 crore at October-end from Rs 1,22,684 crore at the end of September, according to the data.

P-note were on a decline since June and hit over eight-year low in September. This was in view of stringent norms put in place by the Securities and Exchange Board of (Sebi).

Of the total in October, P-note holdings in equities were at Rs 90,161 crore and the remaining in debt and derivatives

Besides, the quantum of FPI investments via P-notes remains unchanged at 4.1 per cent.

Over the past few months, has taken several measures to stop the misuse of the controversy-ridden participatory notes. In July, the regulator notified stricter P- notes norms stipulating a fee of USD 1,000 that would be levied on each instrument to check any misuse for channelising black money.

Also, prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes.

The move was a follow-through of Sebi's board approval of a relevant proposal in June. These measures were an outcome of a slew of other steps taken by the regulator in the recent past.

In April, Sebi had barred resident Indians, NRIs and entities owned by them from making investment through P-notes. The decision was part of efforts to strengthen the regulatory framework for P-notes, which have been long seen as being possibly misused for routing black money from abroad.

First Published: Wed, December 06 2017. 19:26 IST