Investment in Indian P-notes falls in June on Fed rate hikes

Investment in the Indian capital markets through participatory notes (P-notes) declined to ₹80,092 crore till June-end, making it the lowest level in 20 months, on aggressive rate hike by the US Federal Reserve. With the continued global uncertainty and volatility, experts believe that investment through P-notes will be volatile in the near future. P-notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process. According to the Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets -equity, debt, and hybrid securities -- stood at ₹80,092 crore at June-end compared to ₹86,706 crore at May-end. This was the lowest level since October 2020, when investment through the route was at ₹78,686 crore. The June figure also marks the second consecutive monthly decline in investment numbers. Of the total ₹ 80,092 crore invested through the route till June 2022, ₹70,644 crore was invested in equities, ₹ 9,355 crore in debt, and ₹92 crore in hybrid securities. In comparison, ₹70,644 crore was invested in equities and ₹9,355 crore in debt during May. Divam Sharma, founder at Green Portfolio, a portfolio management service provider, said the participation in equities has seen the lows of October 2020 whereas the AUC (assets under custody) had shown a low of April 2021. Meanwhile, foreign investors pulled out Indian shares worth ₹ 50,203 crore in June -- the highest net outflow in over two years -- amid aggressive rate hike by the US Federal Reserv and elevated inflation.