FIIs' market investments via P-Notes hit a 7-year peak of $43 bn in FY15

Foreign investors have used participatory notes (P-notes) worth $43 billion (Rs2,72,000 crore) to invest in Indian securities during the financial year ended 31 March 2015, the highest amount in over seven years.

FII investments through P-Notes climbed to 11.3 per cent in March 2015 from 11.1 per cent in February.

The total value of P-Note investments in Indian markets (including equity, debt and derivatives) rose to Rs2,72,078 crore at the end of March 2015 from Rs2,71,752 crore in the preceding month, data released by the Securities and Exchange Board of India (Sebi) showed.

This is the highest investment since February 2008, when the cumulative value of such investments stood at Rs3,23,000 crore.

It may be noted that this increase in P-Note investment comes after a decline in its share in overall foreign investments in Indian markets.

P-Notes, which used to account for more than 50 per cent of the total FII investments until a few years ago, had since lost their share after Sebi tightened 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 in 2007.

P-Notes, mostly used by overseas HNIs (High Networth 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 costs for investors, but the route can also be used for round tripping of black money.