PLUNGE IN PARTICIPATORY NOTES INDIAN CAPITAL MARKETS

Participatory Notes investment market in India, came down to a nine year low level by Rs. 93,000 crores during end May this year, with the strict rules and regulations brought out by SEBI imposed to check their misuse.

  1. SEBI adds that the total value of P-note investment in Indian markets through equity, debt and derivatives came down by Rs. 93,497 crore which was Rs. 1,00,245 crore at the end of March this year. Before this the figure read Rs. 1,06,403 crore.
  2. This is said to be the lowest level since 2009 when the cumulative value of such investments was Rs. 72,314 crore.
  3. Out of the last month’s investments, Rs. 70,442 crore related to equities and the balance was of Debt and Derivate markets.
  4. Additionally the FPI investment through Participation Certificates fell down by 2.9% during the period under review from 3% in the preceding month.
  5. It is also understood that investment in Participation Certificates were on decline since June last year and came down to a low in eight year, during September.   Though they showed an increase in October from November onwards it was on a continuous fall.

Reasons for the fall:

  • Several measures taken by the market to avoid misuse of the certificates, is said to be the major reason for the fall.
  • In order to curb black money, SEBI in July 2017 had notified a fee of USD 1000 on each instrument.
  • Also SEBI had forbidden FPIs from use of Participatory notes, where the underlying was a Derivative, except the instances wherein they are used for hedging.
  • Also, in April last year SEBI had barred resident Indians, NRIs and entities owned by them from making investments through Participatory notes.

Note:

Participatory Notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be a part of Indian stock market without registering themselves directly.  However, they are required to go through a proper due diligence process.

Author: Admin Bankedge

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