Investments through participatory notes in Indian capital markets reached Rs 1.5 lakh crore at Feb-end, the highest level in nearly six years, driven by a strong performance of the domestic economy. P-notes are issued by FPIs to overseas investors who wish to invest in Indian stocks without registering themselves.
Foreign fund flows into India through an obscure offshore derivative called participatory notes are increasing, with investments in Indian stocks, bonds, and hybrid securities reaching 1.43 trillion rupees ($17.3 billion) at the end of January. This surge in investment comes despite stricter disclosure requirements imposed by regulators to verify client identity. The rise is driven by India’s growing stock market, which is attracting investors seeking alternatives to China. However, authorities remain cautious about participatory notes, due to concerns about potential money laundering.
