Thursday, October 18, 2007


What are P Notes?
Participatory Notes -- or P-Notes or PNs -- are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India.

The BSE SENSEX Index opened over a 1000 points down, hitting a low of 17,308, down over 1740 points.

Fears of restrictions on P Notes, and curbing foreign institutional investment in Indian equities triggered circuit breakers and the markets were shut for 1 hour .

Clarifications from the Finance minister and the stock market regulator SEBI, confirming no ban on P –Notes and no ban on offshore derivative instruments contracts (expiring this month or in the following months being renewed, provided the renewal does not go beyond 18 months), helped markets recover.

"Let me assure all investors what has been done is to moderate capital flows, which have become very copious. It is a culmination of long discussions between SEBI, RBI and government," the Finance minister Mr P.Chidambaram said, adding that "SEBI's proposals are just a consultation paper, but would become regulations with or without some modifications. "

The market gradually recovered closing at 18,715.82, down only 336 points.

Valuations remain high and the markets volatile.

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