P-NOTE IN­VEST­MENTS DIP

Millennium Post - - FRONT PAGE -

NEW DELHI: In­vest­ments through par­tic­i­pa­tory notes (P-notes) plunged to nearly nine-year low of Rs 1.06 lakh crore in the cap­i­tal mar­ket at March-end amid strin­gent norms put in place by the reg­u­la­tor Sebi to check mis­use of these in­stru­ments.

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

Ac­cord­ing to the Sebi data, to­tal value of P-note in­vest­ments in In­dian mar­kets — eq­uity, debt, and de­riv­a­tives -- slumped to a low of Rs 1,06,403 crore at March-end from Rs 1,06,760 crore at the end of the pre­ced­ing month. Prior to that, the fig­ure was Rs 1.19 lakh crore.

This is the low­est level since June 2009 when the cu­mu­la­tive value of such in­vest­ments stood at Rs 97,885 crore.

Of the to­tal in­vest­ments in last month, P-note hold­ings in eq­ui­ties were at Rs 73,264 crore and the re­main­ing in debt and de­riv­a­tives mar­kets.

How­ever, the quan­tum of FPI in­vest­ments via P-notes rose to 3.4 per cent dur­ing the pe­riod un­der re­view from 3.3 per cent in the pre­ced­ing month.

P-note in­vest­ments were on a de­cline since June last year and hit an over eight-year low in Septem­ber. How­ever, these in­vest­ments slightly rose in Oc­to­ber but fell in Novem­ber and the trend con­tin­ued till March this year.

The de­cline could be at­trib­uted to sev­eral mea­sures taken by the mar­ket watch­dog to stop the mis­use of the con­tro­ver­syrid­den par­tic­i­pa­tory notes.

In July 2017, Sebi no­ti­fied stricter norms stip­u­lat­ing a fee of $1,000 that would be levied on each in­stru­ment to check any mis­use for chan­nelis­ing black money.

Also, the reg­u­la­tor pro­hib­ited FPIS from is­su­ing such notes where the un­der­ly­ing as­set is a de­riv­a­tive, ex­cept those which are used for hedg­ing pur­poses.

The move was a fol­lowthrough of Sebi's board ap­proval of a rel­e­vant pro­posal in June last year. These mea­sures were an out­come of a slew of other steps taken by the reg­u­la­tor in the re­cent past. In April 2017, Sebi had barred res­i­dent In­di­ans, NRIS and en­ti­ties owned by them from mak­ing the in­vest­ment through P- notes. NEW DELHI: For­eign in­vestors have pumped in Rs 3,935 crore into the In­dian debt mar­kets in the first fort­night of the month, driven by a sta­ble cur­rency and at­trac­tive bond yields.

This comes fol­low­ing a net out­flow of Rs 12,750 crore in the last two months (Fe­bru­ary­march) largely due to a surge in in­ter­est rates in home mar­kets as well as ru­pee de­pre­ci­a­tion out­look due to crude price and fis­cal deficit.

Prior to that, for­eign port­fo­lio in­vestors (FPIS) had put in over Rs 8,500 crore in Jan­uary.

Ac­cord­ing to de­pos­i­tory data, FPIS in­vested a net sum of Rs 3,935 crore ($605 mil­lion) in the debt mar­kets dur­ing April 2-13.

"With sta­ble cur­rency and bond yields at at­trac­tive lev­els, FPIS con­tinue to find value in In­dian bonds. The net pos­i­tive flow into the fixed in­come seg­ment could also be at­trib­uted to the re­cent in­crease in FPI limit for in­vest­ment in gov­ern­ment se­cu­ri­ties," Morn­ingstar In­dia Se­nior An­a­lyst Man­ager Re­search Hi­man­shu Sri­vas­tava said.

Ajay Bodke, CEO and Chief Port­fo­lio Man­ager, PMS at Prab­hu­das Lil­lad­her said that the out­look for in­vest­ments in debt mar­kets has bright­ened af­ter the RBI'S re­cently an­nounced mon­e­tary pol­icy that low­ered the tar­get for re­tail in­fla­tion to 4.7-5.1 per cent for first half of the on­go­ing fis­cal as against its fore­cast of 5.1-5.6 per cent in Fe­bru­ary 2018.

"This along with RBI rais­ing the in­vest­ment limit for FPI in cen­tral gov­ern­ment se­cu­ri­ties to 5.5 per cent of out­stand­ing stock of se­cu­ri­ties in 2018-19 and to 6 per cent of out­stand­ing stock of se­cu­ri­ties in next fis­cal led to cool­ing-off of yields and re­newed in­ter­est among FPI'S for In­dian debt se­cu­ri­ties," he added.

Go­ing ahead, Sri­vas­tava said that rate hikes by the US Fed­eral Re­serve could ad­versely im­pact the flows into the debt seg­ment.

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