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Investments through P-notes hit nearly 9-year low of Rs 83,688 crore in September
Oct-17-2018

The share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) hit a nearly nine-and-a-half year low of Rs 79,548 crore in September 2018. According to Securities and Exchange Board of India (SEBI) data, total value of P-note investments in Indian markets including equity, debt and derivatives, at September end declined to Rs 79,548 crore from Rs 84,647 crore clocked by August-end, which was the first rise in such fund infusion in 10 months. Prior to that, the figure was Rs 80,341 crore in July. The fund inflow through P-notes in September was the lowest since April 2009, when the cumulative value of such investments stood at Rs 72,314 crore.

Of the total, P-note holdings in equities at August-end were at Rs 60,164 crore, while in debts and derivatives were at Rs 15,477 crore and Rs 3,907 crore respectively. Besides, the quantum of FPI investments via P-notes remained unchanged at 2.5% during the period under review from the preceding month. The decline in investment could be attributed to several measures taken by the market watchdog to stop the misuse of the controversy-ridden participatory notes. P-notes are issued by registered foreign portfolio investors (FPIs) to overseas players who wish to be part of the Indian stock market without registering themselves directly. However, they need to go through due diligence.

SEBI, in July 2017, had notified stricter norms stipulating a fee of $1,000 on each instrument to check any misuse for channelising black money. It had also prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. Meanwhile, in September, market regulator SEBI issued revised KYC norms for FPIs, wherein resident as well as non-resident Indians have been permitted to hold non-controlling stake in such entities. These norms have been put in place weeks after a panel suggested various changes to the guidelines proposed earlier, amid concerns in certain quarters that overseas funds might face difficulties in ensuring compliance.

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