Investment through participatory notes within the domestic capital market increased to Rs 57,100 crore as of April 30 after falling to over 15-year low at the top of preceding month.
P-notes are issued by registered foreign portfolio investors to overseas investors who wish to be a part of Indian stock exchange without registering themselves directly. They need to go through a due diligence process.
According to the Sebi data, the worth of P-note investment in Indian markets that equity, debt, hybrid securities, and derivatives stood at Rs 57,100 crore until April, while an equivalent was at Rs 48,006 crore at the top of March. The figure at March-end was rock bottom level of investment since October 2004, when the entire value of P-note investments in Indian markets stood at around Rs 44,586 crore.
The lower figure in March comes during significant volatility in broader markets on concerns over the coronavirus that triggered the recession.
Of the entire Rs 57,100 crore invested through the route till April, Rs 46,165 crore was invested in equities, Rs 10,619 crore in debt, Rs 177 crore within the derivatives segment and also Rs 139 crore in hybrid securities.
Fund inflow through the route stood at Rs 68,862 crore, Rs 67,281 crore, and 64,537 crores at the top of February 2020, January 2020, and December 2019, respectively. However, it was at Rs 69,670 crore at the November end of last year.
Arjun Mahajan the top of institutional business, at Reliance Securities said the March P-note figure should be seen in conjunction with the large sell-off in Nifty, which hit low of 7511.10 on March 24. There was global panic and risk-off trade which saw panic selling globally and India was no different. The month of April saw some risk returning and therefore the P-note numbers went back up, as he added.
Besides, another anecdotal evidence is the FPI outflows. Another aspect that may be considered in a current uncertain environment is that Investment certain FPI investors, who don’t have an FPI license, and who may not want to invest in India for the long term and just invest to either capitalize on easy liquidity and also attractive valuations (when compared to historic peaks), may prefer P-note route as it gives them the choice to take a position for however long they need , make their target returns and get away , he added.
Earlier in September, the Securities and Exchange Board of India (Sebi) simplified KYC requirements and registration process for FPIs. Besides, the regulator broad-based the classification of such investors.
Meanwhile, FPIs withdrew a net sum of Rs 14,858 crore from the capital market’s equity and debt in April. This was much less than over Rs 1.2 lakh crore pulled out by them within the preceding month.