FPIs domiciled at GIFT City Allowed to Issue P-Notes to Investors

Foreign portfolio investors (FPIs) registered with the Securities and Exchange Board of India (SEBI) and domiciled at the GIFT International Financial Services Centre (IFSC) are permitted to issue participatory notes (PNs).

What are P-Notes?

1. P-Notes, also known as Participatory Notes, are financial instruments used by investors to invest in Indian securities.
2. They do not require registration with SEBI, making them attractive to offshore investors seeking exposure to the Indian stock market without directly registering themselves.
3. Investments flowing through P-Notes are classified as offshore derivative investments.
4. Registered foreign portfolio investors (FPIs) issue P-Notes to overseas investors who wish to participate in the Indian stock market.
5. While FPIs must report all investments through P-Notes to SEBI each quarter, they are not required to disclose the identities of the actual investors.

What is Foreign Portfolio Investment (FPI)?

1. FPI refers to the purchase and holding of various foreign financial assets by investors seeking to invest outside their own country.
2. Foreign portfolio investors can invest in stocks, bonds, mutual funds, derivatives, fixed deposits, and other investment instruments.
3. FPIs typically invest in a foreign country's stock market with the intent of generating short-term returns.
4. In India, the Securities and Exchange Board of India (SEBI) regulates foreign portfolio investment.

What are Derivatives?

1. Definition: Derivatives are financial contracts whose value is derived from an underlying asset or benchmark. Common underlying assets include stocks, bonds, commodities (e.g., oil, gold), currencies, interest rates, or market indices.
2. Key Feature: The price of a derivative is linked to the price movements of its underlying asset. As the underlying asset's price changes, so does the value of the derivative.

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