Use of Participatory Notes in Indian Equity Markets and Recent Regulatory Changes

Author/Editor:

Manmohan Singh

Publication Date:

December 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper focuses on the use of participatory notes (PNs) by foreign investors, as a conduit for portfolio flows into Indian equity markets for more than a decade. The broadening of India's foreign investor base, in recent years, has a bias towards hedge funds/unregistered foreign investors who invest primarily via PNs. While tax arbitrage via capital gains tax has almost disappeared since July 2004, it is intriguing to note that since then the demand for PNs has actually increased. The paper suggests some reasons for the continuation of a buoyant market in PNs, and explains the possible impact from the recent regulatory changes.

Series:

Working Paper No. 07/291

Subject:

English

Publication Date:

December 1, 2007

ISBN/ISSN:

9781451868548/1018-5941

Stock No:

WPIEA2007291

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

13

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