Foreigners tap $30 bn in P-Notes to invest in Indian markets in February

Foreign investors, including hedge funds and high net worth individuals, bought $30 billion (Rs1,64,000 crore) worth of securities in Indian markets through participatory notes (P-Notes) in February.

P-Note investments in February were higher in rupee terms at Rs1,64,000 crore in February 2013 against Rs1,62,000 crore recorded in January 2013. In dollar terms, however, it was lower at $30 billion in February 2013 against $32.4 billion in January 2013, data released by market regulator Securities and Exchange Board of India showed.

The cumulative value of P-Note investments in Indian markets (equity, debt and derivatives) stood at Rs1,64,271 crore at the end of February, according to SEBI data.

The quantum of FII investments through P-Notes also hit a six-month high of 12.33 per cent of FII investments in February against 11.83 per cent in the previous month. This was the highest figure since August last year when FII investments via P-Notes stood at 12.7 per cent.

P-Notes used to account for 15-20 per cent of total FII holdings in India since 2009, while it used to be much higher, in the range of 25-40 per cent, in 2008.

P-Notes used to account for more than 50 per cent of total FII investments at the peak of Indian stock market boom during a few months in 2007, but their share came down after SEBI tightened investment regulations.

Foreign funds used Rs1,62,000 crore worth of P-Notes to buy securities in Indian markets in January.

P-Notes allow overseas investors, including high net worth individuals (HNIs), hedge funds and other foreign funds, to invest in Indian markets through foreign institutional investors (FIIs) registered with SEBI, thus saving on time and costs.