P-Note investments in Indian stocks hit a 2-1/2-year high of $29 bn in October

Foreign investors have invested $29 billion (nearly Rs1,83,862 crore) into Indian shares through participatory notes (P-Notes) as of end-October 2012 - the highest in two-and-a-half years.

This is the highest level of P-Note investments since May 2011, when the cumulative value of such investments stood at Rs2,11,199 crore, data released by the Securities and Exchange Board of India (SEBI) showed.

P-Note investments in India markets stood at Rs1,71,000 crore at the end of September 2013.

P-Notes, a preferred route for HNIs, 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.

P-Note investments into equity market have been rising in the past few months on the back of continued liquidity arising from the US Fed's $85 billion monthly bond buying programme.

FII investments through P-Notes, however, marginally declined to 12.98 per cent in October from 13.06 per cent in September.

The percentage of P-Notes used to buy stocks has, however, declined from 50 per cent before 2008 to 15-20 per cent after market regulator Securities and Exchange Board of India (SEBI) tightened disclosure norms for such investments in 2009.

FIIs, the key drivers of Indian markets, pumped in around Rs 15,700 crore ($2.55 billion) in the Indian equity market last month. However, they withdrew over Rs13,500 crore ($2.2 billion) from the debt market in October.