The 30-share index of the BSE (Bombay Stock Exchange, India), SENSEX, which reached a lifetime high up to 18,000, fell 1744 points, after the SEBI put its suggestion late on Tuesday evening. The market was closed for an hour. The p-Notes are to be said Hugh behind the increase in foreign direct investment, which caused the current market requirements rally. "They will be taken by SEBI said in the right direction," the Finance Minister of India – P. Chidambaram said. The Securities and Exchange Board of India (SEBI) onTuesday proposed to observe the rules for the purchase of stocks and bonds in Indian companies through the participatory drag (p-notes) route. The move is in the arrest of the increase in foreign direct investment through p-notes should be.
So what are these p-notes? Why such a calamity upon them? What makes them so special? P-Notes are financial instruments used by investors or hedge funds, which were not approved by the Securities and Exchange Board of India, the Indian securities to invest.Indian-buy India-based securities broker and then a participatory notes to foreign investors. Any form of dividends or capital gains from underlying securities acquired back to the investors. Participatory notes are like contract notes. These are by FIIs to people who want to invest in Indian stock market, but do not wish granted with the SEBI registration. SEBI was not very happy about participatory found that, because they do not know, who owns the underlyingSecurities, feared it, is that hedge-fund trading through participatory notes lead the economic volatility of the stock exchanges in India.
I feel that this step is taken by the SEBI good step towards improving the clarity of FII investment. Many say it should have been done much before about 6-7 years back. But then p-notes were not as high weighted by the FII investment vehicle. In a report has said, "the notional value of PNs increased from 20%FII / sub-account assets crore in March 2004 to 51.6% in August 2007, in other words, of Rs 31,875 crore to Rs 3,53,484! . While FIIs were net investors in the amount of $ 8.5 billion in the last calendar year, expectations are that it would invest close to 12 billion U.S. dollars this year. This would limit the market and P Notes to more than U.S. $ 5 billion if the same ratio were maintained for the next three months