Investments through participatory notes (P-notes) in the Indian capital market surged to a 27-month high of Rs 83,114 crore at November-end driven by continued liquidity and improvement in second-quarter corporate earnings. 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.

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According to the Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets — equity, debt and hybrid securities — increased to Rs 83,114 crore at November-end from Rs78,686 crore at October-end. This was the highest level of investment since August 2018, when fund inflow through such route stood at Rs 84,647 crore.

The investment through this route had declined to Rs 69,821 crore at the end of September 2020. Prior to that, the investment level was at Rs 74,027 crore,Rs 63,228 crore, Rs 62,138 crore, Rs 60,027 crore and Rs 57,100 crore at the end of August, July, June, May and April, respectively.

The investment level had fallen to an over 15-year-low of Rs 48,006 crore at the end of March amid significant volatility in broader markets on concerns over the coronavirus-triggered crisis. Of the total Rs 83,114 crore invested through this route till November, Rs 72,910 crore was invested in equities, Rs 10,009 crore in debt and Rs 196 crore in hybrid securities.

Divam Sharma, co-founder of Green Portfolio said P-notes investments could be attributed to continued liquidity from low bond yields, the accommodative stance of central banks globally and improvement in performance from companies in the second quarter. In addition, positive developments related to COVID-19 vaccines and better indications from data like IIP, PMI have created positive stance for overseas investors.

Besides, the assets under the custody of FPIs have reached to Rs 38.51 lakh crore, which is the highest level in the history validating their conviction on Indian markets. This was Rs 34.36 lakh crore at October-end. Meanwhile, FPIs infused nearly Rs 63,000 crore in the capital markets across equity, debt and hybrid instruments last month. This included Rs 60,350 crore in equities alone.

Green Portfolio’s Sharma said that Indian equities have lured the highest inflows in November as compared to its peers in Asian markets including South Korea and Taiwan.