P-notes investment continues to swell; hits 1-yr high in Oct

Investment in the Indian capital markets through participatory notes rose to Rs 97,784 crore at the end of October, the highest in a year. This was also the third consecutive monthly increase in investments through such a route.

Participatory notes (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 Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets -- equity, debt, and hybrid securities -- stood at Rs 97,784 crore in October-end, as compared to Rs 88,813 crore at the end of September.

October P-notes investment level was the highest since October 2021, when investment through this route stood at Rs 1.02 lakh crore.

Investment through the P-notes route was Rs 84,810 crore, Rs 75,725 crore and Rs 80,092 crore at the end of August, July and June this year, respectively.

Investment via P-notes normally moves in line with FPI investment. When there is a global risk to the environment, investment through P-notes increases and vice-versa.

"There is a consensus that India is the fastest-growing large economy in the world this year and next year. While the global economy is slowing down India remains resilient. India's earnings prospects also look good.

"This is attracting foreign investors to India. Also Indian rupee is expected to remain stable giving confidence to foreign investors," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Of the total Rs 97,784 crore invested through this route till October this year, Rs 88,490 crore was invested in equities, Rs 9,105 crore in debt, and Rs 190 crore in hybrid securities.

In contrast, Rs 79,418 crore was invested in equities and Rs 9,156 crore in debt during September this year.

Manish P Hingar, Founder at Fintoo, said investment in P-Notes in the Indian capital markets has been on an increasing trend since July because of a decline in the prices of oil and other commodities and relative outperformance of Indian equity markets.

"India has the best growth story in terms of earnings and growth dynamics. When there is a global risk-on environment, participation through P-notes normally increases. With money moving out of China, Indian equities have a relative attractiveness," he added.