Investments through P-notes | 18 Apr 2019

Investments through Participatory Notes in domestic capital market rose to Rs 78,110 crore at the end of March,2019 amid positive market sentiments.

Participatory notes (P-notes) are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly after going through a due diligence process.
The increase in P-notes investment is in line with the higher net inflows of Foreign Portfolio Investors (FPIs) in the cash segment.

Foreign portfolio investment (FPI) consists of securities and other financial assets passively held by foreign investors.
- It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market.
- Foreign portfolio investment is part of a country’s capital account and is shown on its Balance of Payments (BOP).
- The BOP measures the amount of money flowing from one country to other countries over one monetary year.
The investor does not actively manage the investments through FPIs, he does not have control over the securities or the business. However, since the investor’s goal is to create a quick return on his money, FPI is more liquid and less risky than Foreign Direct Investment (FDI).
In contrast, FDI lets an investor purchase a direct business interest in a foreign country. The investor’s goal is to create a long-term income stream while helping the company increase its profits.
The investor controls his monetary investments and actively manages the company into which he puts money. However, because the investor’s money is tied up in a company, he faces less liquidity and more risk when trying to sell his interest.