P-Notes or Participatory notes is utilised by the overseas HNIs, foreign institutes and hedge to invest in the Indian market through registered foreign institutional investors. In here, the overseas investors are not required to register themselves with the market regulator. The market regulator is Securities and Exchange Board of India, also known as SEBI. The entire procedure of investing through these tools is really simple and hassle free. So, these are utilised for fabricating investments in the stock market. These are also called as offshore derivative instruments. With the aid of these instruments, the investor need not invest directly in the Indian stock market. The total of FII investments via P notes has been 11 percent presently.
Decline in the investment of P-notes might be appointment of Special investigation team to keep a tab on the black money holders.
What are the aspects associated with the P-notes?
There are the following aspects associated with the P notes:-
- They are anonymous- Since, the investment in Participatory notes does not require registering with SEBI, hence the operation of large hedge funds can be carried out with ease, without any disclosure of the identity. Thus, these are anonymous and do not pose any problem to the investors.
- Easy operation- Since the operation involves a simple procedure like endorsement and delivery; hence the trading is relatively easy. This is a hassle free procedure which is utilised by hedge funds as well as foreign investors.
- Tax save- There are a number of entities which can take the advantage of tax saving with the aid of the P notes. Hence, there are more and more number of foreign investors who are utilizing the benefit of P notes.
- Money laundering- P-notes are becoming one of the easiest way to pursue the process of money laundering. This is one of the major problems which are witnessed by the Government since the inception of the p notes.
What is the present scenario of P-notes?
In accordance with the SEBI data, total value of investment of P notes, has declined in the coming months. There has been a gradual decline in the investment from June to August; it rose in the month of September and October. This again fell in the month of November.
Why is being there a dip in the investment of p-notes?
There has been appointed a Special investigation team to keep a tab on the black money holders. This SIT is also known as the Special investigation team was asked by the SEBI, to provide with finer regulations in association with p-notes, so as to identify end users of this instrument. In fact, there has been the notification provided by the Minister of State for Finance, Jayant Sinha on providing with a robust framework for P-notes. There was the time when the total investments made by the foreign investors, was 50 % of the total investment done by them. But now the new regulations have changed the scenario. This is the reason, there has been witnessing a gradual decrease in the number of investments done in the context.
It will be interesting to see where the scenario leads.