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.
What are 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.
- 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.