Investment through Participating Notes decreases to Rs 86,706-cr in May

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Investing in Indian capital markets through equity notes (P notes) fell to Rs 86,706 crore through the end of May from the previous month, as experts say foreign investors will reverse their stance selling and will return to country stocks in the next 1-2. quarters.

P-notes are issued by Registered Foreign Portfolio Investors (REITs) to foreign investors who wish to participate in the Indian stock market without registering directly. They must, however, go through a due diligence process.

According to data from the Securities and Exchange Board of India (Sebi), the value of P-note investments in Indian markets – equities, debt securities and hybrid securities – stood at Rs 86,706 crore at the end of May against Rs 90,580 crore at the end of April. .

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In March, the investment was Rs 87,979 crore. It was Rs 89,143 crore in February and Rs 87,989 crore in January.

Of the total Rs 86,706 crore invested till May 2022, Rs 77,402 crore was invested in equities, Rs 9,209 crore in debt and Rs 101 crore in hybrid securities. By comparison, Rs 81,571 crore was invested in equities and Rs 8,889 crore in debt in April.

“In terms of ODI (offshore derivatives) in equities and debt, we are back to December 2020 levels.

“However, if we look ahead from here, most of the pain is priced in with rising 10-year bond yields and equity markets showing a significant decline,” Divam Sharma said. , founder of Green Portfolio, a provider of portfolio management services.

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There is still uncertainty around inflation levels and US Federal Bank actions. In addition, the currency correction has occurred to a large extent.

“Equity markets are offering attractive valuations at these levels and across the supply chain, and inflation concerns should begin to ease over the coming months. Markets generally move ahead of the economic cycle and we believe that over the next 1-2 quarters, we should see REITs return to capital allocation to Indian equities,” he added.

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In line with the drop in investments in P-notes, assets in the custody of REITs fell by 5% to Rs 48.23 lakh crore at the end of May from Rs 50.74 lakh crore at the end of April. Sharma attributed much of this reduction to the market correction in equity and debt portfolios.

Meanwhile, foreign investors withdrew nearly Rs 40,000 crore from Indian stocks and Rs 5,505 crore from debt markets last month over fears of an aggressive rate hike by the US Fed that has haunted these markets. investors and shaken feelings.

This is the eighth consecutive month of net REIT withdrawals from equities.

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