After hitting a 7-month high in the month of May, the share of foreign portfolio investments (FPI) through participatory notes (P-notes) has decreased to Rs 1.65 lakh crore at the end of June, due to strict norms enforced by SEBI to tackle inflow of illicit funds. According to Securities and Exchange Board of India (SEBI) data, total value of P-Notes investments in Indian markets including equity, debt and derivatives, at June-end declined to Rs 165,241 crore, from Rs 180,718 crore at the end of May.
Of the total, P-note holdings in equities at June-end were at Rs 107,113 crore, while in debts and derivatives were at Rs 25,672 crore and Rs 32,456 crore respectively. The quantum of FPI investments via P-Notes decreased to 5.7 percent in June, from 6.3 percent in the preceding month. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.
The SEBI had put in place restrictions on foreign portfolio investors from issuing participatory notes where the underlying asset is a derivative, as the markets regulator continues to make norms stricter for such instruments. Now, participatory notes or Offshore Derivative Instruments (ODIs) where the derivative is underlying can be issued only for the purpose of hedging with respect to the equity shares held.