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P-notes investment drops to over 7 year low of Rs 1.25 lakh crore at August- end

The stricter norms put in place by the market regulator, Securities and Exchange Board of India (Sebi) continued to hit participatory notes (P-notes) investments in month of August too. The share of foreign portfolio investments (FPI) in domestic capital markets through P-notes dropped to seven and a half year low of Rs 1.25 lakh crore at August- end from Rs 1.35 lakh crore at the end of July. Prior to that, the total investment value through P-notes stood at Rs 1.65 lakh crore in June-end and Rs 1.81 lakh crore in May-end.

Of the total, P-note holdings in equities at August-end were at Rs 88,911 crore, while in debts and derivatives were at Rs 27,482 crore and Rs 8,645 crore respectively. The quantum of FPI investments via P-notes decreased to 4.1 percent in August from 4.4 percent in July month and 5.7 percent in June.

The markets regulator, in July, had notified stricter P-notes norms stipulating a fee of $1,000 that would be levied on each instrument to check any misuse for channelising black money. The regulator also prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. In April, Sebi had barred resident Indians, NRIs and entities owned by them from making investment through P-notes. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.

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