Investment in P-notes 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 signaling 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 due diligence.

According to data by the Securities and Exchange Board of India (Sebi), the value of Pnote 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. The forwardlooking 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, 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 offshore derivative instrument having derivative instruments as underlying security other than for hedging their position in equity,” he added.