The share of foreign portfolio investments (FPI) through participatory notes (P-notes) in domestic capital markets has declined to nine-and-a-half year low of Rs 66,587 crore at the end of October. According to SEBI data, total value of P-Notes investments in Indian markets including equity, debt and derivatives, at October end fall to Rs 66,587 crore from Rs 79,548 crore in the end of September and Rs 84,647 crore in August.
Of the total, P-note holdings in equities at October-end were at Rs 50,584 crore, while in debts and derivatives were at Rs 14,563 crore and Rs 1,441 crore respectively. The quantum of foreign portfolio investors’ (FPIs) investments via P-notes dropped to 2.2 percent during the period under review from 2.4 percent in the preceding month. P-notes are issued by registered FPIs to overseas investors who wish to be part of the Indian stock markets without registering themselves directly. They, however, need to go through a proper due diligence process.
SEBI, in July 2017, had notified stricter norms stipulating a fee of $1,000 on each instrument to check any misuse for channelising black money. It also prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. Meanwhile, in September this year, the market regulator 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 were 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.