FIIs route $28 billion through participatory notes in equity

FIIs route $28 billion through participatory notes in equity

The latest data from Sebi puts foreign investments into domestic markets through 'Participatory Notes'(P-Note) – a preferred route for overseas HNIs and hedge funds – is Rs 1.51 lakh crore (dollar equivalent of $28 billion) at the end of 2012.

The cumulative value of P-Note investments in the Indian markets (of equity, debt and derivatives) stood was at Rs 1,51,084 crore at December-end 2012, while investment by rich overseas entities in the Indian market through P-notes stood at Rs 1.38 lakh crore at the end of 2011, avers Sebi data. 

At the same time, the December figure was lower than total investments of Rs 1.77 lakh crore in November and Rs 1.75 lakh crore in October.

Participatory Notes, mostly used by overseas HNIs (High Networth Individuals), hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign institutional investors (FIIs), while saving on time and costs associated with direct registrations.

Besides, value of P-Notes issued with derivatives as underlying, was at Rs 1.01 lakh crore at the end of the 2012.  However, the quantum of FIIs investments through P-Notes declined to 11.3 per cent in December from 13.7 per cent in the previous month.

Till recently, P-Notes used to account for more than 50 per cent of total FII investments, but their share has fallen after Sebi tightened its disclosure and other regulations for such investments.

The P-note investments were on a steep uptrend this year till mid-March, but started declining sharply after the government in its Union Budget proposed GAAR taxation regime and certain retrospective amendments for taxing offshore transactions.

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