Tougher P-notes norms hit Sensex, Nifty hard

The domestic equity markets extended their loss for the third straight day despite gains in global stocks as foreign portfolio investors turned heavy sellers after the Securities and Exchange Board of India (Sebi) tightened the norms governing the issue and transfer of participatory notes (P-notes).

After opening the day on a positive note, the Sensex failed to sustain its winning momentum and ended the week on a negative note. The Sensex closed the session at 25,301.90, down 97.82 points while the Nifty ended the day at 7,749.70, down 33.70 points.

“The Indian markets started the day on a tight range with a positive bias, it soon lost momentum following the market regulator’s move to tighten P-note, which may impact the flow of foreign investors in the near-term. Additionally, India is concerned over volatility in oil prices and possible interest rate hike in US,” said Vinod Nair, head of research at Geojit BNP Paribas.

Economic affairs secretary Shaktikanta Das, however, said that the issuers of P-notes or offshore derivative instruments (ODIs) have been sensitised about the provisions and all of them are on board. He added that Sebi has only asked those entities to comply with Indian KYC provisions as these norms are pretty relaxed in some jurisdictions.

The notional value of ODI to assets under custody of FPIs has declined over the years from a high of 55.7 per cent in June 2007 to 10 per cent in March 2016.