Investment in Indian markets through participatory notes (P-Notes), a preferred route for HNIs and hedge funds from abroad, hit a three-month low of Rs 1.67 lakh crore (about $27 billion) in December.
According to the latest data released by market regulator SEBI, the total value of P-Note investments in Indian markets (equity, debt and derivatives) declined to Rs 1,67,566 crore at the end of December 31, 2013 from Rs 1.83 lakh crore in the preceding month.
This is the lowest level touched since September 2013, when the cumulative value of such investments stood at Rs 1.71 lakh crore.
P-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, the value of P-Notes issued with derivatives as underlying, stood at Rs 1.15 lakh crore at the end of December 31, 2013.
FII investments via P-Notes
The quantum of FII investments through P-Notes dropped to 11.4 per cent in December from 13 per cent in the preceding month.
Till a few years ago, P-Notes used to account for more than 50 per cent of the total FII investments, but their share has fallen after SEBI tightened the disclosure norms and other regulations for such investments.
P-Notes have been accounting for mostly 15-20 per cent of the total FII holdings in India since 2009, while it used to be much higher, in the range of 25-40 per cent in 2008. It was as high as over 50 per cent at the peak of Indian stock market bull run for a few months in 2007.
FIIs, the key drivers of Indian markets, pumped in Rs 16,086 ($2.6 billion) in the domestic equity market last month. Also, they infused Rs 5,290 crore ($858 million) in the debt market in December.