FPIs in P-notes jumps to 6-month high in December

After a downfall in the month of November, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) has jumped to a 6-month high of over Rs 1.5 lakh crore at the end of December, despite stringent norms imposed by the market regulator SEBI to check their misuse.  

P-notes are overseas derivative instruments that have Indian stocks as their underlying assets. They allow foreign investors to buy stocks listed on Indian exchanges without being registered. P-notes gained popularity as FIIs, in order to avoid the formalities of registering and to remain anonymous. 

This is the highest level since June when the cumulative value of such investments stood at Rs 1.65 lakh crore. According to SEBI data, the total value of P-notes investments in Indian markets, including equity, debt and derivatives, at the end of December 2017 surged to Rs 152,243 crore from Rs 128,639 crore at the end of November 2017. As per the available data, the total investment value through P-notes stood at Rs 131,006 crore and Rs 122,684 crore at October-end and September-end, respectively.

Prior to the recent surge, P-note investments were on a decline since June 2017 and hit an over eight-year low in September 2017. However, these investments slightly rose in October 2017, but fell in November 2017.  Besides, these declines could be attributed to several measures taken by the market regulator SEBI to stop the misuse of the controversy-ridden P-notes.