P-Notes investment climbs to Rs 2.23 lakh cr

Investments through participatory notes (P-Notes) into India's capital markets increased to Rs 2.23 lakh crore in March after hitting 18 month low in the preceding month.
This also marks the first rise in investments via P-Notes in four months. Prior to that, since November, the total value of investment through this route in Indian markets had been falling.
Used mostly by overseas HNIs (high networth individuals), hedge funds and other foreign institutions, P-Notes allow investors to invest in Indian markets through registered foreign portfolio investors (FPIs), the key drivers of Indian markets.
It saves time and cost for them, but the flip side is that this route can also be used for round-tripping of black money.

According to Sebi data, total value of P-Notes investment in Indian markets (equity, debt and derivatives) rose to Rs 2,23,077 crore at the end of March from 2,17,740 crore in the preceding month.
The February figure marked the lowest level since August 2014, when the cumulative value of such investments stood at Rs 2.11 lakh crore.

Total value of P-Notes investment in Indian markets stood at Rs 2.58 lakh crore in October, Rs 2.54 lakh crore in November, Rs 2.35 lakh crore in December, Rs 2.31 lakh crore in January and Rs 2.17 lakh crore in February. It was Rs 2.54 lakh crore in September.

Of the total, P-Note holdings in equities were at Rs 1.38 lakh crore at March-end and the remaining holdings were in debt and derivatives markets.
However, quantum (percentage) of FII investments via P-Notes fell to 10 per cent last month from 10.7 per cent in February.
Meanwhile, the benchmark Sensex climbed 10.17 per cent during the period under review.
Last month, Sebi chairman U K Sinha had said strong measures have been put in place to check any misdemeanors including misuse of the instrument.
Till a few years ago, P-Notes used to account for more than 50 per cent of the total FII investment, but their share has fallen over the years after Sebi tightened disclosure norms and other related regulations.

As things stand, P-Notes make up around 15-20 per cent of the total FII investment in India since 2009.
While it used to be much higher, 25-40 per cent in 2008, the reading was as high as over 50 per cent at the peak of stock market bull run in 2007.
In absolute terms, value of P-Notes investment rose to a record of 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.