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Economy
Pradeep Kumar

02/03/22 11:00 AM IST

Investments through P-notes decline

In news

Investments in the Indian capital market through Participatory notes (P-notes) dropped to Rs 87,989 crore at the end of January 2022.

Details
  • 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.
  • P-notes are financial instruments used by investors and hedge funds to invest in the Indian securities, and no registration is required with the SEBI, the market watchdog in India.
  • Investments flowing in through PNs are considered as offshore derivative investments (ODIs). Deutsche Bank and Citigroup are the leading issuers of participatory notes.
Participatory Notes Explained
  • Foreign institutional investors (FIIs), issue the financial instruments to investors in other countries who want to invest in Indian securities.
  • An FII is an investor or investment fund registered in a country outside of the one in which it is investing.
  • This system lets unregistered overseas investors buy Indian shares without the need to register with the Indian regulatory body.
  • These investments are also beneficial to India. They provide access to quick money to the Indian capital market.
  • Because of the short-term nature of investing, regulators have fewer guidelines for foreign institutional investors.
  • To invest in the Indian stock markets and to avoid the cumbersome regulatory approval process, these investors trade participatory notes.
Benefits
  • PNs can be easily traded in foreign countries via endorsement and delivery.
  • PNs are well known as investors, and hedge funds can enter Indian markets anonymously and go about their operations.
Source: The Hindu

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