Foreign Portfolio Investors (FPIs) registered at the GIFT International Financial Services Centre (IFSC) and with the Securities and Exchange Board of India (SEBI) have recently been permitted to issue Participatory Notes (P-Notes).
About the Participatory Notes (P-notes):
- They are financial instruments issued by registered foreign FPIs that enable foreign investors to invest in the Indian stock market without the need to register directly with SEBI.
- These notes serve as a substitute for underlying shares of Indian companies.
- They are also referred to as Offshore Derivative Instruments (ODIs).
- In 2023, the Securities Contracts (Regulation) Act, 1956 was amended to recognize ODIs issued by FPIs at GIFT.
Benefits of Participatory Notes:
- They provide options for investors to invest in Indian stocks and avoid the hassle of registering with SEBI.
Challenges Associated with Participatory Notes:
- Issues include opacity and the potential for uncontrolled money flow into the Indian stock market.
Ref: Source
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