Participatory notes (P-notes)

Subject – Economy

Context – P-note investment rises to 40-month high in July.

Concept –

Participatory notes (P-notes) are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves under SEBI directly after going through a due diligence process.
The increase in P-notes investment is in line with the higher net inflows of Foreign Portfolio Investors (FPIs) in the cash segment.
P-Notes are Offshore Derivative Investments (ODIs) with equity shares or debt securities as underlying assets, as they are used by the investors abroad but not within India.
They provide liquidity to the investors as they can transfer the ownership by endorsement and delivery.
While the FIIs have to report all such investments each quarter to SEBI, they need not disclose the identity of the actual investors.