P-notes investment swell to 14-month high in October on enhanced global liquidity

Investments through participatory notes (P-notes) in the Indian capital market surged to Rs 78,686 crore at October-end, making it the highest level in 14 months, on enhanced global liquidity and measures taken by the government back home.

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 and hybrid securities -- increased  to Rs 78,686 crore at October-end from Rs 69,821 crore as on September 30.

This was the highest level of investment since August 2019, when fund inflow through such route stood at Rs 79,088 crore.

The investment through the route declined in September 2020 after witnessing growth since March.

Prior to that, the investment level was at Rs 74,027 crore,  Rs 63,228 crore, Rs 62,138 crore, Rs 60,027 crore and Rs 57,100 crore at the end of August, July, June, May and April, respectively.

The investment level had fallen to an over 15-year-low of Rs 48,006 crore at the end of March amid significant volatility in broader markets on concerns over the coronavirus-triggered crisis.

Of the total Rs 78,686 crore invested through the route till October, Rs 68,415  crore was invested in equities, Rs 10,047 crore in debt and Rs 224 crore in hybrid securities.

Divam Sharma, co-founder of Green Portfolio said P-notes continued the positive momentum in October with equity inflows showing a significant jump. The numbers will significantly rise hereon with high-interest levels from foreign capital to participate in Indian markets.

According to him, foreign fund flows till date have been robust in November post the virtual meeting of Prime Minister Narendra Modi with the global fund managers.

"Continued government efforts to increase inflows from foreign institutions, enhanced global liquidity, and efforts from PLI (production-linked incentive) scheme Aatmanirbhar Bharat, and import substitution are creating positive momentum for funds to flow to Indian markets," he added.

The assets under the custody of FPIs shot up to Rs 34.36 lakh crore at October-end from Rs 33.22 lakh crore at the end of September.

Meanwhile, FPIs infused over Rs 21,800 crore in the capital markets last month after pulling out Rs 1,196 crore in September.