After hitting an over eight- year low in the month of September, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) surged to Rs 1.31 lakh crore at the end of October. According to Securities and Exchange Board of India (SEBI) data, total value of P-note investments in Indian markets including equity, debt and derivatives, at October-end, climbed to Rs 131,006 crore, from Rs 122,684 crore at the end of September. Prior to that, the total investment value through P-notes stood at Rs 125,037 crore in August-end and Rs 135,297 crore in July-end.
Investments through P-Notes were showing declining trend in the past few months mainly on the stricter norms put in place by the market regulator, but the October data came in as a big surprise showing 6.78% growth month on month basis. Of the total, P-note holdings in equities at October-end were at Rs 90,161 crore, while in debts and derivatives were at Rs 30,468 crore and Rs 10,378 crore respectively. Though, the quantum of FPI investments via P-notes remains unchanged at 4.1 per cent.
P-Notes or offshore derivative instruments are issued by FPIs to individuals or institutions located outside India who do not want to invest directly in the domestic market by registering with Sebi. However, they need to go through due diligence and Sebi has prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes.