Investment via P-Notes hits 6- year high in May

Investment in shares through participatory notes (P- Notes), a preferred route for overseas high net worth individuals (HNIs) and hedge funds, surged to a six- year at Rs 2.12 lakh crore (around $ 35 billion) in May.

According to the latest figures released by the Securities and Exchange Board of India (Sebi), the total value of P- Note investment in financial markets ( equity, debt and derivatives) rose to Rs 2,11,740 crore at the end of May from Rs 1,87,486 crore in the preceding month.

It was the highest since May 2008, when the cumulative value of such investment stood at Rs 2,34,933 crore.

P- Notes allow foreign investors enter markets through registered foreign institutional investors (FIIs) and exempts them from getting registered directly with Sebi.

This saves time and costs for investors, but the flip side is that the route can also be used for round tripping of black money.

According to market analysts, investment in the equity market via P- Notes had been rising in the past few months mainly on hopes of a stable, businessfriendly government. It shot up in May, after the general election results, primarily on the new government's promise to revive economic growth. PNote investment climbed from Rs 1.63 lakh crore in January to Rs 2.12 lakh crore in May.

P- Notes accounted for a major chunk of FII in recent years, but their share fell after Sebi tightened disclosure norms and other rules for such investment. The government has been concerned over the increase as some of these PNote investment could be used to channel black money. A senior income tax official toldM AIL T ODAY that P- Notes enable investors to keep their identity anonymous as they can be freely traded and easily transferred without disclosing the identity of actual beneficiaries.

Courtesy: Mail Today