Title: The interesting story of participatory notes in India

Authors: Renu Vashisth; Nidhi Malhotra

Addresses: Vivekananda Institute of Professional Studies, AU-Block, Pitampura, New Delhi – 110034, India ' Lal Bahadur Shastri Institute of Management, Sector-11, Dwarka, New Delhi – 110075, India

Abstract: The term 'participatory notes' (P-Notes) was not very familiar to everyone in our country until recent past. P-Notes are tools used for making investments in the stock markets. They are used outside India for construction tools in shares listed in the Indian stock market. That is why they are also called offshore derivative instruments. In the last one decade (since July 2004) when tax arbitrage via capital gain tax was almost disappeared, the demand of P-Notes has actually increased. Investment through P-Notes formed an important source of foreign portfolio investors (FPIs) to Indian stock market during the last two decades. Due to their opaque structure, they have been on regulatory radar and subject to stringent regulations to check misuse of funds. The present study attempts to examine extensively the journey of P-Notes in emerging stock market like India. It has also been attempted to critically examine the market watchdog regulatory regime to tighten the noose on P-Notes.

Keywords: participatory notes; P-Notes; offshore derivative instruments; foreign portfolio investors; FPIs; emerging stock market.

DOI: 10.1504/IJTTC.2020.109408

International Journal of Technology Transfer and Commercialisation, 2020 Vol.17 No.2/3, pp.242 - 256

Received: 25 May 2019
Accepted: 13 Nov 2019
Published online: 08 Sep 2020 *

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