The ongoing bull rally may be fuelled by foreign funds, but a major chunk of the money coming through the participatory notes route is beyond any major regulatory scrutiny in India. A Sebi study shows 25 per cent of the total foreign institutional investment is through the participatory note (PN) issued to unknown clients of FIIs abroad. This indicates a rise of nearly Rs 6,000 crore in money routed through PNs in less than two months.According to Sebi, the total value of underlying investments in equity represented by the PNs is Rs 21,179 crore, representing about 25 per cent of the total investments in equities of Rs 84,762 crore at the end of November 2003. ‘‘The analysis of PN reports indicates that the underlying investments represented by PNs are diversified across over 200 scrips,’’ the Sebi said. There are 515 entitles registered as FIIs with Sebi at the end of November 2003. ‘‘Out of these FIIs, only 12 entities have issued PNs outstanding as at the end of November 2003,’’ Sebi says. FII investment through PNs has shot up in the last two months. Last month, the total net investments of 12 FIIs/sub-accounts through PNs were about Rs 15,133 crore. This was 20 per cent of the total FII investment of Rs 80,325 crore as on October 13, 2003.
