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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.

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