October P-note inflow hits 14-month high

Our Bureau Mumbai | Updated on November 19, 2020

Investors pump in ₹78,686 cr in Oct

Investments into India’s stock market through offshore derivative instruments (ODIs), also known as participatory notes (P-notes), seem to be making a comeback. Inflows through this route touched ₹78,686 crore in October, the highest in 14 months, according to data released by SEBI. This is the highest since August 2019 when fund flow through P-notes was ₹79,088 crore.

Nearly 90 per cent of investments in October has been pumped into the equity market.

P-note is an instrument issued by a registered foreign institutional investor to overseas investors who want to invest in Indian stock markets without registering themselves with SEBI. The investment level had fallen to a 15-year low of ₹48,006 crore in March.


Market experts said the recent effort by the Centre to attract foreign funds will keep the momentum going in the coming months. Prime Minister Narendra Modi had met representatives of top global investment and sovereign wealth funds as part of these efforts. Higher global liquidity is also helping in driving investments through P-notes, analysts said. SEBI had also rationalised the requirements for issuance and subscription of offshore derivative instruments. In 2007, nearly half of India’s ₹10-lakh-crore worth of debt and equity positions by FPIs were held via P-notes. The instrument accounted for the lion’s share of the derivative positions and often caused massive volatility on derivative expiry.

After years of tightening, SEBI in August 2017 sounded the death knell for P-notes, saying they could no longer be used except for the purpose of hedging.

Published on November 19, 2020

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