P-notes investment rose to Rs 90,580 crore in April

Investment in the Indian capital market through participatory notes (P-notes) increased marginally to Rs 90,580 crore at the end of April, as foreign investors shifted relocations from China to India amid a significant economic downturn in the most populous country.

P-notes are issued by registered foreign portfolio investors (FPIs) to foreign investors who want to be part of the Indian stock market without registering themselves directly. But they have to go through a proper hard work process.

According to the Securities and Exchange Board of India (SEBI), the value of P-note investments in the Indian market – equity, debt and hybrid securities – stood at Rs 90,580 crore at the end of April, compared to Rs 87,979 crore in March.

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In February, the investment reached Rs 89,143 crore as against Rs 87,989 crore in January.

Sonam Srivastava, founder of Wright Research, a SEBI-registered investment adviser, said investment through P-notes has increased since March last year, as FPIs in April were net sellers in the Indian market with negative flows in both equity and debt sectors.

“This slight increase may be justified by the fact that foreign institutional investors are shifting allocations from China to India due to the significant economic downturn in China, or the IPOs released in April have attracted foreign investors. So, there is a small up-run from the March issue but it is exciting to see strategic foreign hedge funds take a position in India, ”he added.

Manoj Trivedi, co-founder of SEBI-registered investment adviser, Jama Wealth, said these are legal instruments. They could potentially be used for money laundering purposes. Attempts have been made to bring P-notes under regulatory jurisdiction when Indian markets are booming, but controls have been lifted as capital flows have declined.

“Given that FPIs have been net sellers in the market for some time, there seems to be an increase in investment through P-notes. This may indicate that foreign investors continue to see India as an attractive investment destination, but they want to make sure that they do not get stuck in regulatory compliance if they need to leave quickly, “said Srivastava.

Of the total investment of Rs 90,580 crore through Route till April 2022, Rs 81,571 crore was invested in equity, Rs 8,889 crore in debt and Rs 120 crore in hybrid securities. In comparison, Rs 78,233 crore was invested in equity and Rs 9,9953 crore in debt in March. In contrast to P-note investments, assets held by FPIs fell to Rs 50.74 lakh crore from March 50.97 lakh crore at the end of April.

Meanwhile, foreign investors withdrew Rs 17,144 crore from Indian equities and Rs 4,439 crore from the debt market amid fears of an aggressive rate hike by the US Fed, which has hurt and hurt the feelings of such investors. This was the seventh consecutive month of FPI’s net withdrawal from equity.

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