Foreign investment in the domestic market reduced through P-notes, the impact of pressure in the stock market

P-notes in the domestic capital market (P-note) has seen a decline in investment. Investment in the month of May as compared to April (Investment) came down to Rs 86,706 crore. This is the lowest level in any month of the year 2022. However, market experts are predicting that this trend will change in the coming one to two quarters and investment by foreign investors will start increasing once again. P-notes are issued by Registered Foreign Portfolio Investors (FPIs) to foreign investors who wish to invest in the Indian stock market without registering themselves directly. However, they will have to follow a standard procedure as per the rules.

How much was invested through P-notes

According to Dari data by SEBI, the value of investments through P-notes in Indian markets including equity, debt and hybrid securities stood at Rs 86,706 crore at the end of May. A month ago, at the end of April, this figure was Rs 90,580 crore. Investment in March was Rs 87,979 crore, in February it was Rs 89,143 crore and in January it was Rs 87,989 crore. That is, the value of investment through P Notes has been increasing and decreasing so far in 2022. However, for the first time in May, it has reached below Rs 87 thousand crore. According to the data, out of total Rs 86,706 crore invested through this route till May 2022, Rs 77,402 crore was in equities, Rs 9,209 crore in debt and Rs 101 crore in hybrid securities. In the same April, there was an investment of Rs 81,571 crore in equity and Rs 8,889 crore in debt. It is clear from the data that the decline in the total investment was seen due to the decrease in investment in equities.

What is expert opinion

Divam Sharma, founder, portfolio management services provider Green Portfolio, said equity market valuations have now improved and concerns over supply chain and inflation will start easing in the coming months. It is expected that the situation in the market will start improving further and FPIs will once again return to the domestic markets in the next one to two quarters. Due to the decline in investment through P-notes, the assets of FPIs have come down by 5 percent to the level of 48.23 lakh crore. Which were at the level of Rs 50.74 lakh crore at the end of April. At the same time, foreign investors have withdrawn about 40 thousand crore rupees from the equity market and 55 hundred crore rupees more from the debt market last month. This is the eighth consecutive month that foreign investors have withdrawn money from the market.