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What are Participatory Notes?

Participatory notes or P-notes are financial instruments that allow people or hedge funds to invest in Indian shares and stocks without having to be registered with the SEBI. <br>This presentation will show you how they are beneficial in the Indian Stock Market(https://www.edelweiss.in/market)

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What are Participatory Notes?

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  1. What are participatory notes?

  2. Introduction Participatory notes or P-notes are financial instruments that allow people or hedge funds to invest in Indian shares and stocks without having to be registered with the SEBI. It is a member of Offshore Derivative investments (ODIs) group that helps a hedge fund to invest in stocks outside their country. These ODIs have Indian stocks as assets under their names. P-notes as an instrument gained popularity as Foreign Institutional Investments (FIIs) so the investor can trade with all the anonymity and avoid going through a big registration process. These notes help hedge funds outside India to invest without worrying about SEBI rules and regulations.

  3. How do they work? By now, you might have understood that participatory notes are used to invest in the Indian stock market by foreign individuals and hedge funds. These p-notes help them earn extra dividends or capital gains without having to go through the whole regulatory process like FDIs. There are three stakeholders involved in completing this investment. The first is the investor, second is FII and third is a broker. Indian FIIs are set up in different countries to help them invest in the Indian stock market. These FIIs need to have registered themselves with SEBI without which they aren’t eligible for being an FII or invest money in the Indian market. Be it hedge funds or individuals, both have to contact these FIIs to invest in the Indian market. These FIIs make an investment on the behalf of hedge funds and high net worth individuals. After this, the Indian brokers are supposed to report their participatory note issuance status to the regulatory board each quarter. These notes allow foreign investors to participate in the Indian markets without registering SEBI. This is the reason why investors and hedge funds do not require to go through the regulatory process. All of it is done by brokers and FIIs.

  4. Advantages of Participatory notes Anonymity: Large hedge funds and individuals can easily invest in the Indian stock market without disclosing their identity Trading with Ease: Participatory notes allow investors to easily invest in stocks. It is easy to invest through participatory notes because they are like contract notes that are transferrable by delivery and endorsement Tax Saving: Some entities route their investments through participatory notes since a few countries offer tax benefits on investments through FIIs.

  5. conclusion P-notes or participatory notes are great investments for entities to invest in Indian stock markets. To help reduce p-note investments, SEBI has taken many steps so more and more people register for capital investment. Due to the taxation system, a few FPI investors are still exploring this route to invest without hassles.

  6. THANK YOU

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