Participatory-note investments touch over 5-year high of Rs 1.13 lakh crore at June-end

Driven by stable macroeconomic fundamentals, investment in the Indian capital markets through participatory notes rose to Rs 1.13 lakh crore in June-end, making it the highest level in five-and-half years. This includes the value of P-note investments in Indian equity, debt, and hybrid securities.

Also, this marks the fourth consecutive monthly increase in the investment level through this route, data with the Securities and Exchange Board of India (Sebi) showed.

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 Sebi data, the value of P-note investments in Indian markets -- equity, debt, and hybrid securities -- stood at Rs 1,11,291 crore at the end of June as compared to Rs 1,04,585 crore in May-end.

In comparison, the investment through the route was Rs 95,911 crore in April-end, Rs 88,600 crore in March-end, Rs 88,398 crore in February-end and Rs 91,469 crore in January-end.

The flow in the month of June was the highest level since January 2018, when investment through the route stood at Rs 1.19 lakh crore.

The growth in P-notes generally aligns with the trend in FPI flows, when there is a global risk to the environment, investment through this route increases and vice-versa.

Market analysts said one of the prime factors for the growth in P-notes investment is the stable Indian economy amid an uncertain global macro backdrop. In addition, the slowdown in the Chinese economy has also led investors to shift their focus toward India.

Of the total Rs 1.11 lakh crore invested through this route till June this year, Rs 1,00,701 crore was invested in equities, Rs 12,382 crore in debt and Rs 203 crore in hybrid securities.

In addition, assets under custody of the FPIs grew to Rs 55.63 lakh crore in June, from Rs 52.95 lakh crore in the preceding month.

Meanwhile, FPIs' investment in Indian equities rose to a 10-month high at Rs 47,184 crore in June, while they also infused Rs 9,200 crore in the debt market.