P-notes investment climbs to 33-month high at Rs 91,658 cr in Feb

Investments through participatory notes (P-notes) in the Indian capital market rose to Rs 91,658  crore at February-end, making it the highest level in 33 months, suggesting growing confidence of overseas investors.

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 – increased to Rs 91,658 crore in February-end from Rs 84,916 crore at January-end.

Prior to that, the investment level was at Rs 87,132 crore in December-end.

The month of February 2021 saw the highest level of investment since May 2018, when fund inflow through such route stood at Rs 93,497 crore.

Of the total Rs 91,658 crore invested through the route till February, Rs 84,195 crore was invested in equities, Rs 6,833 crore in debt and Rs 630 crore in hybrid securities.

"A sharp rise in FPIs' participation through offshore derivative instruments or P-notes in February once again vindicates growing confidence of overseas investors into domestic markets.

"However, we note that FPIs' participation through P-note route has been improving in consistently since April 2020," Binod Modi, head strategy at Reliance Securities, said.

Divam Sharma, co-founder of Green Portfolio, said the month of February 2021 witnessed highest inflows into equities from FPIs. In fact, March is also looking positive from FPI inflows perspective.

However, he warned that second wave of COVID-19 cases and rise in bond yields in the USA can become a dampener for FPI flows in the near term.

"Despite markets seeing the pullout of funds from domestic institutional investors, the FPI inflows have supported the markets to rise in the past few months.

"However, next two-three years looks great from FPIs inflows as we are seeing lots of investor interest in Indian markets considering the domestic fundamentals and growth potential," Sharma  added.

Besides, the assets under the custody of FPIs has reached to Rs 44.07 lakh crore, which is the highest levels in the history validating their conviction on Indian markets.

This was Rs 41.15 lakh crore at January-end.

Meanwhile, FPIs infused over Rs 24,000 crore in the capital markets last month.