Investments in domestic shares through participatory notes (P-Notes) surged to the highest level in more than six-and-half years at Rs 2.65 lakh crore (about $43 billion) in October.

According to the data released by the Securities and Exchange Board of India (SEBI), the total value of P-Note investments in Indian markets (equity, debt and derivatives) rose to Rs 2,65,675 crore at the end of October from Rs 2,22,394 crore in September.

This is the highest level since February 2008, when the cumulative value of such investments stood at Rs 3,22,743 crore.

P-Notes, mostly used by overseas HNIs (High Networth Individuals), 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 registration.

According to market analysts, investment into the equity market via P-Notes had been rising in the past few months, mainly on account of the government’s reforms agenda and a rally in the country’s equity markets.

Investments shot up in May, post the general election results, primarily on the new government’s promise to revive economic growth and the momentum continued till October.

The quantum of FII investments through P-Notes grew to 12.2 per cent last month from 10.7 per cent in September.

Till a few years ago, P-Notes used to account for more than 50 per cent of the total FII investments, but their share has fallen after SEBI tightened the 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 during 2007.

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