P-notes investment jumps to Rs 84,647 crore at August-end

09 Oct 2018 Evaluate

Rising for first time in 10 months, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) jumped Rs 84,647 crore at the end of August. 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 August end climbed to Rs 84,647 crore from Rs 84,647 crore at the end of July. Prior to this, an increase in investment was seen in October 2017, when the cumulative value of such fund infusion rose to Rs 1,31,006 crore from Rs 1,22,684 crore in September-end.

Of the total, P-note holdings in equities at August-end were at Rs 66,233 crore, while in debts and derivatives were at Rs 14,648 crore and Rs 3,765 crore respectively. Besides, the quantum of FPI investments via P-notes rose to 2.5% during the period under review from 2.4% in the preceding month. P-notes are issued by registered foreign portfolio investors (FPIs) to overseas players who wish to be part of the Indian stock market without registering themselves directly. However, they need to go through due diligence.

Before the rise, P-note investments were on a decline since, June last year and hit an over eight-year low in September. However, these investments rose slightly in October but fell again in November and the trend continued till July this year. In July this year, the investment had touched the lowest level since April 2009 when the cumulative value of such investments stood at Rs 72,314 crore. The decline in investment could be attributed to several measures taken by the market watchdog to stop the misuse of the controversy-ridden participatory notes.

Recently, market regulator SEBI issued revised KYC norms for FPIs, wherein resident as well as non-resident Indians have been permitted to hold non-controlling stake in such entities. These norms have been put in place weeks after a panel suggested various changes to the guidelines proposed earlier, amid concerns in certain quarters that overseas funds might face difficulties in ensuring compliance. Non-resident Indians, overseas citizens of India and resident Indians have been permitted to hold non-controlling stake in FPIs. There would also be no restriction on them to manage the non-investing FPIs SEBI-registered offshore funds as well as registered investment managers.

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