Investment via participatory notes slip to Rs 1.26 trillion in Oct

Investments in the Indian capital markets through participatory notes (P-notes) dropped to Rs 1.26 lakh crore in October-end after rising for seven consecutive months.

The latest data includes the value of participatory note investments in Indian equity, debt, and hybrid securities.

Participatory notes (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.

Before registering a decline in October, investments through P-notes have been increasing continuously since March, following the stable Indian economy against an uncertain global macro backdrop.

According to the latest data from markets regulator Sebi, the value of P-note investments in Indian markets -- equity, debt, and hybrid securities -- stood at Rs 1,26,320 crore at the end of October compared to a six-year high of Rs 1,33,284 crore at September-end.

This was the highest level since July 2017 -- when investment through the route stood at Rs 1.35 lakh crore.

In comparison, investment through the route was Rs 1.28 lakh crore in August, Rs 1.23 lakh crore in July, Rs 1.13 lakh crore in June, Rs 1.04 lakh crore at May-end, Rs 95,911 crore at April-end, Rs 88,600 crore at March-end, Rs 88,398 crore at February-end and Rs 91,469 crore at January-end.

The growth in P-notes generally aligns with the trend in FPI flows. When there is a global risk to the environment, investment through this route increases, and vice-versa.

Of the total Rs 1.26 lakh crore invested through this route till September, Rs 1.18 lakh crore was invested in equities, Rs 8,055 crore in debt, and Rs 385 crore in hybrid securities.

In addition, assets under custody of FPIs fell to Rs 56.8 lakh crore in October-end from Rs 58.45 lakh crore in the preceding month.

Meanwhile, FPIs pulled out Rs 24,500 crore from Indian equities in October while they infused close to Rs 6,400 crore in the debt market.

Market analysts attributed the withdrawal from equities to a sharp surge in the US treasury yield, and the uncertain environment resulting from the Israel-Hamas conflict.