Investment through participatory notes in Indian capital markets stood at Rs 84,810 crore in August

28 Sep 2022 , 10:32 AM

After three consecutive months of falls, investment through participatory notes in the Indian capital markets increased to Rs84,810 crore at the end of August as a result of a decline in the price of oil and other commodities.

However, Sonam Srivastava, Co-Founder of Wright Research, a Sebi-registered research investment adviser, warned that P-note participation may be muted in September as a result of the FPI’s increased caution.

Registered FPIs provide participatory notes (P-notes) to foreign investors who want to participate in the Indian stock market without registering directly. But they must perform their due diligence beforehand.

The value of P-note investments in Indian markets, including equity, debt, and hybrid instruments, was Rs84,810 crore in August, up from Rs75,725 crore at the end of July, according to statistics from the Securities and Exchange Board of India (Sebi).

Investing through the method was Rs80,092 crore at the end of June, Rs86,706 crore at the end of May, and Rs90,580 crore at the end of April.

Up till August 2022, a total of Rs84,810 crore was invested via this mechanism, of which Rs75,389 crore was put into equity investments, Rs9,330 crore into debt, and Rs91 crore into hybrid instruments. Comparatively, in July of this year, Rs9,592 crore was put in loans and Rs66,050 crore was invested in stocks.

According to Srivastava, the Indian stock market had a fantastic month in August. Small and midcap companies prospered as a result of the market’s impressive recovery. FPIs made large investments throughout the month as well. The P-notes also had the same pattern. While the debt involvement remained modest, the equity participation through P-notes rose.

Despite a strong dollar and increasing bond rates, they noted the main drivers of FPIs’ purchases were the correction in Indian stocks and declining oil and commodity prices, particularly those of steel and aluminum.

On account of an increase in risk sentiment and a stabilization in oil prices, FPIs invested a little over Rs51,200 crore–the biggest amount in 20 months–into the Indian equities markets in August. This occurred after a net investment by them in July of around Rs5,000 crore. FPI flows have been quite volatile in September, with over Rs6,000 crore in total investments made thus far.

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