Current Affairs

Investment in P-notes hits 9-year low at Rs 80,341 crore

Investments through participatory notes (P-notes) into Indian capital markets- equity, debt, and derivatives have plunged to over nine-year low of Rs 80,341 crore till July 2018 end.
Investment in P-notes hits 9-year low at Rs 80,341 crore

  • This is the lowest level since April 2009 when the cumulative value of such investments stood at Rs 72,314 crore.

Reason for this decline:

  • The decline comes amid stringent norms put in place by market watchdog Securities Exchange Board of India (SEBI) to check misuse of these instruments.
  • In July 2017, Sebi had notified stricter norms stipulating fee of US $1,000 on each instrument to check any misuse for channelising black money.
  • It had also prohibited FPIs from issuing such notes where underlying asset is derivative, except those which are used for hedging purposes.
  • Earlier in April 2017, SEBI had also barred resident Indians, NRIs and entities owned by them from making investment through P-notes.

About Participatory Notes (P-notes):

  • P-notes are offshore/overseas derivative instruments (ODIs) issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be part of the Indian stock market without registering themselves directly.
  • They, however, need to go through due diligence process.
  • P-Notes are not used within the country but are mainly used outside India for making investments in shares listed in the Indian stock market.
  • SEBI had permitted FIIs to participate and register in the Indian stock market in 1992.
  • Earlier, investing through P-Notes was very simple and was very popular amongst FPIs and FIIs.

Question:

Q. Investments through which financial instrument into Indian capital markets- equity, debt, and derivatives have plunged to over nine-year low of Rs 80,341 crore till July 2018 end?
a. Preliminary notes (P-notes)
b. Participatory notes (P-notes)
c. Primary notes (P-notes)
d. None of the above
Investment in P-notes hits 9-year low at Rs 80,341 crore Investment in P-notes hits 9-year low at Rs 80,341 crore Reviewed by Inderjeet Virdi on August 19, 2018 Rating: 5

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