P-notes investment hit over 15-yr low of Rs 48,000 cr till Mar-end

New Delhi: Investments through participatory notes (P-notes) in the domestic capital market plunged to an over 15-year low of Rs 48,006 crore at the end of March amid high volatility in broader markets on concerns over coronavirus-triggered recession.

The decline in fund inflow through P-notes comes after two successive months of positive investments.

P-notes investment stood at Rs 67,281 crore and Rs 68,862 crore at the end of January and February respectively.

P-notes are issued by registered foreign portfolio investors (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 Rs 48,006 crore until March, while the same was at Rs 68,862 crore at the end of February.

This was the lowest level of investment since October 2004, when the total value of P-note investments in Indian markets stood at Rs 44,586 crore.

Of the total Rs 48,006 crore invested through the route, Rs 37,859 crore was invested in equities, Rs 9,889 crore in debt, Rs 153 crore in the derivatives segment and Rs 104 crore in hybrid securities.

Fund inflow through this route stood at Rs 67,281 crore and Rs 64,537 crore in January 2020 and December 2019 respectively. However, it was at Rs 69,670 crore in November last year.

Investment in January increased after hitting a nearly 11-year low at the end of December 2019, when the total value of P-note investments in Indian markets stood at Rs 64,537 crore.

This lower quantum of investment through P-notes route could be attributed to liberalised norms for FPIs by Sebi, market experts noted.

Earlier in September, 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 pulled out a net sum of over Rs 1.2 lakh crore from the capital markets as the coronavirus pandemic dented investor sentiment worldwide. This included nearly Rs 62,000 crore from equities and over Rs 56,000 crore from the bond markets.