Current Affairs
Daily Bits

P-notes investment swell to 14-month high in October on enhanced global liquidity

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    20th Nov, 2020

Investments through participatory notes (P-notes) in the Indian capital market surged to Rs 78,686 crore at October-end, making it the highest level in 14 months. The maximum part of it was invested in equities, followed by debt and hybrid securities.

Context

  • Investments through participatory notes (P-notes) in the Indian capital market surged to Rs 78,686 crore at October-end, making it the highest level in 14 months. The maximum part of it was invested in equities, followed by debt and hybrid securities.

What are reasons behind the surge?

  • The Continued government efforts to increase inflows
  • enhanced global liquidity
  • efforts from PLI (production-linked incentive)
  • scheme such as Aatmanirbhar Bharat
  • and import substitution

P-notes

  • A participatory note, commonly known as a P-note or PN, is an instrument issued by a registered foreign institutional investor (FII) to an overseas investor who wishes to invest in Indian stock markets.
  • Investors do not need to register themselves with the market regulator, the Securities and Exchange Board of India (SEBI).
  • SEBI permitted foreign institutional investors to register and participate in the Indian stock market in 1992.
  • These notes are a unique Indian invention started in 2000 by SEBI.
  • They're also referred to as offshore derivative instruments as they are not used within the country; they are used outside of India for making investments in stocks listed on Indian stock markets

What are the drawbacks with P-notes?

  • Anonymity
  • Tax evasions
  • Money laundering

 Regulation of P-notes

  • In 2007, SEBI proposed curbs on participatory notes which accounted for roughly 50% of FII investment in 2007.
  • SEBI was concerned about P-notes because it is not possible to know who owns the underlying securities and hedge funds acting through P-notes might therefore cause volatility in the Indian markets.

Verifying, please be patient.

X