According to the latest data released by the Securities and Exchange Board of India (Sebi), the total value of P-Note investments in Indian markets (equity, debt and derivatives) rose to 1,77,164 crore at the end of November after falling to a near three-year low of Rs 1,28,895 crore in May.
The November figure has reached highest level since February, when the cumulative value of such investments stood at Rs 1,83,151 crore.
P-Notes, mostly used by overseas HNIs, hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors (FIIs), while saving on time and costs associated with direct registrations.
Market analysts say investment through P-Notes has been rising in the past three months on policy reform measures taken by the government and its initiatives to address tax related issues.
Besides, value of P-Notes issued with derivatives as underlying, was at a Rs 94,658 crore at the end of November.
The quantum of FIIs investments through P-Notes, however, declined to 13.7 per cent in November, from 14.4 per cent in the previous month.
P-Notes have been accounting for mostly 15-20 per cent of total FII holdings in India since 2009, while it used to be much higher - in the range of 25-40 per cent in 2008. It was as high as over 50 per cent at the peak of Indian stock market bull run during a few months in 2007.
Their share has fallen after Sebi tightened disclosure and other regulations for such investments.
FIIs, the key driver of Indian markets, poured in $24 billion (around Rs 1.28 lakh crore) into Indian equities in 2012 -- second highest net inflows since 1993 when India opened up its door for foreign investors.
Overall, P-Note investments were on a steep uptrend this year till mid-March, but started declining sharply after the government in its Union Budget proposed new taxation regime of General Anti-Avoidance Rule (GAAR) and certain retrospective amendments for taxing offshore transactions.