P-Notes investment falls to Rs 2.12 lakh cr in September after hitting a 5 months high

New Delhi: Investments into domestic capital markets through participatory notes (P-Notes) dropped to Rs 2.12 lakh crore in September after hitting a five months high of Rs 2.16 lakh crore at the end of August.

P-Notes are typically instruments issued by registered foreign portfolio investors to overseas investors who wish to invest in Indian markets without registering themselves directly in India to save on time. But they still need to go through a proper due diligence process.

According to Sebi data, the total value of P-Notes investment in Indian markets -- equity, debt and derivatives -- declined to Rs 2,12,509 crore in September after hitting a five months high of Rs 2,16,232 crore at the end of August. Prior to that, it was Rs 2,12,179 crore in July.

In June, investments through P-Notes had plunged to Rs 2.10 lakh crore, which was the lowest level in nearly two years owing to a tight vigil on funds coming through this route.

The board of Sebi, in May, tightened norms to check any misuse of controversy-ridden P-Notes by making it mandatory for users of these overseas instruments to follow Indian anti-money laundering law and report any suspicious transactions immediately.

The total value of P-Notes investment in Indian markets has fallen since October 2015 and the trend continued till February this year. However, it saw a slight increase in March but again slumped in April.

A slight uptick in the investment through P-Notes was witnessed in May, however, it again plunged in June. Further, marginal increase was seen in July and August, while it has again slipped in September.

Of the total, P-Note holdings in equities were at Rs 1.26 lakh crore in September-end and the remaining holdings were in debt and derivatives markets.

The quantum of Foreign Portfolio Investors (FPIs) investments via P-Notes decreased to 8.3 per cent in September from 8.4 per cent in the preceding month.

The share of P-Notes has been falling over the years as Sebi tightened disclosure norms and other related regulations. It used to be much higher at 25-40 per cent in 2008, while the reading was as high as 55 per cent at the peak of the stock market bull run in 2007.

In absolute terms, value of P-Notes investment rose to a record Rs 4.5 lakh crore in October 2007, but dropped to Rs 3.22 lakh crore in February 2008 and Rs 60,948 crore in February 2009.