Investments through participatory notes (P-Notes) into India's capital market dropped to Rs2.75 lakh crore (about $43 billion) at the end of June, after touching over seven years high in the preceding month.
P-Notes, mostly used by overseas HNIs (High Net Worth Individuals), hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered Foreign Institutional Investors (FIIs). This saves time and cost for them, but the flip side is the route can also be used for round-tripping of black money.
According to Sebi data, total value of P-Note investment in Indian markets (equity, debt and derivatives) declined to Rs2.75 lakh crore at June-end, from Rs2.85 lakh crore at the end of May. May's figure marked the highest investment since February 2008, when the cumulative value of such investments stood at Rs3.23 lakh crore. The total outstanding value of P-Notes has been rising steadily since January this year and the momentum continued till March, with April registering a drop but May hitting the highest level in over seven years and again it slipped last month.
Besides, the quantum (percentage) of FII investments through P-Notes decreased to 11.5 per cent last month from 11.8 per cent in May. Till a few years ago, P-Notes used to account for more than 50 per cent of total FII investment, but their share has fallen over the years after Sebi tightened disclosure norms and other related regulations.