Investment in Participatory notes continues to soar; hits 10-month high in August

Investment through participatory notes (P-notes) in the domestic capital market surged to over ₹74,000 crore till August-end, making it the highest level in 10 months.

This marks the fifth consecutive monthly rise in the investment through the route, also signalling at growing confidence of foreign portfolio investors (FPIs) in the local market.

P-notes are issued by registered FPIs to overseas investors who wish to be part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.

According to SEBI data, the value of P-note investments in Indian markets – equity, debt, hybrid securities and derivatives – stood at ₹74,027 crore till August-end, while the same was at ₹63,228 crore at the end of July.

The figure at August-end was the highest level of investment since October 2019, when the total value of P-note investments in the Indian markets stood at ₹76,773 crore.

“The rise in FPI participation through P-notes shows their rise in confidence, since the 15-year lows of P-notes participation in March 2020, said Divam Sharma, Co-founder at Green Portfolio, a SEBI registered portfolio management services.

The forward looking FPIs are selectively taking a fresh long position in the markets on hopes of an early revival of the economy from a complete lockdown phase of first quarter, he noted.

“This also brings a positive outlook to FPI participation in Indian markets since the descent of the P-notes participation post 2017, when SEBI prohibited FIIs to issue ODIs (offshore derivative instrument) having derivative instruments as underlying security other than for hedging their position in equity,” he added.

Prior to that, investment level was at ₹62,138 crore, ₹60,027 crore and ₹57,100 crore at the end of June, May and April, respectively. The investment level had fallen to an over 15-year-low of ₹48,006 crore at the end of March amid significant volatility in broader markets on concerns over coronavirus-triggered crisis.

Of the total ₹74,027 crore invested through the route till August, ₹62,811 crore was invested in equities, ₹10,677 crore in debt, ₹338 crore in the hybrid securities and ₹202 crore in derivatives segment.

Besides, assets under the custody of FPIs too increased to ₹33.18 lakh crore in August-end from ₹31.68 lakh crore in July-end. Meanwhile, FPIs pumped in a staggering ₹49,900 crore in the capital market in August after putting in over ₹3,300 crore in the preceding month.

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Printable version | Oct 31, 2020 12:58:37 AM |

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