PARTICIPATORY NOTES -
ECONOMY
News: FPIs domiciled at GIFT City
allowed to issue P-notes to investors
What's in the news?
●
Foreign portfolio investors (FPIs) based at the
GIFT International Financial Services Centre (IFSC) and registered with the
Securities and Exchange Board of India (SEBI) have been granted permission to
issue participatory notes.
Participatory Notes:
●
Participatory Notes, commonly known as PNs or
P-Notes, serve as financial instruments
utilized by investors and hedge funds for investing in Indian securities.
●
They don't
require registration with the Securities Exchange Board of India (SEBI).
Characteristics:
1. Offshore Derivative
Investments:
●
Investments made through Participatory Notes are
categorized as offshore derivative investments.
2. Issuance:
●
Registered foreign Portfolio Investors (FPIs) issue
P-Notes to overseas investors who seek exposure to the Indian stock market
without undergoing direct registration.
3. Anonymity:
●
While Foreign Institutional Investors (FIIs) must
report all investments each quarter to SEBI, they are not obligated to disclose
the identity of the actual investors.
Go back to basics:
Foreign Portfolio
Investment:
●
Foreign Portfolio Investment (FPI) refers to the
acquisition and retention of a diverse range of foreign financial assets by
investors aiming to invest outside their
home country.
Investment Instruments:
●
FPI encompasses investments in various instruments
such as stocks, bonds, mutual funds,
derivatives, fixed deposits, etc.
Objective:
●
Generally, FPI is pursued to inject funds into a
foreign country's stock market with the aim of generating swift returns.
Regulation in India:
● In India, the regulation of foreign portfolio investment falls under the purview of the Securities and Exchange Board of India (SEBI).