Increased Investments through P-notes

Increased Investments through P-notes

Part of: GS-Prelims and GS-III – Economy

In News:

• According to SEBI data, the value of participatory note (P-note) investments in Indian capital markets increased to Rs. 63,288 crore till July 2020-end.

• This is the fourth consecutive monthly rise in investments through P-notes.

Important value additions 

Participatory Notes (P-notes) 

• P-notes are Offshore Derivative Instruments (ODIs) 
• They are issued by brokers and foreign institutional investors (FIIs) registered with SEBI. 
• The investment is made on behalf of foreign investors by the already registered brokers in India who wish to be a part of the Indian stock markets without registering themselves directly.
• P-notes have Indian shares as their underlying assets.
• These instruments are used for making investments in the stock markets. 

Do you know?

• P-notes are not used within the country. 
• They are used outside India for making investments in shares listed in the Indian stock market. 
• That is why they are called offshore derivative instruments.
• For example, Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. 
• Any dividends or capital gains collected from the underlying securities go back to the investors.