Foreign investments into Indian markets through participatory notes (P-Notes), a preferred route for HNIs and hedge funds have surged by about 7.3 per cent at Rs 1.62 lakh crore in January against Rs 1.51 lakh crore in December 2012.
As a percentage of the total assets under the custody of FIIs, the foreign investments through P-Notes have increased to 11.83 per cent in January against 11.3 per cent in December 2012.
According to the latest data released by the Securities and Exchange Board of India, the cumulative value of P-Note investments in Indian markets comprising equity, debt and derivatives was at Rs 1,62,139 crore at the end of January against Rs 1,51,084 crore in December last year. P-Notes allow overseas HNIs, hedge funds and other foreign institutions to invest in Indian markets through registered FIIs while saving on time and costs associated with direct registrations.
According to market analysts, the surge is reflective of the increasing comfort factor of FIIs on use of Mauritius as a haven for taxation.
Saurabh Mukherjee of Ambit Capital said: “The newly emerging clarity on Mauritius continuing to be a safe tax haven for the next two years has eased a lot of concern of using the P-Note route for investments.
“This has helped to bring in additional inflows, especially post the Shome Committee recommendations on the Mauritius as a tax haven which added to the foreign investors comfort factor.
“Going forward, the extent to which this route is considered safe would continue to impact FIIs inflows through P-Notes.”