Will The Return Of P-Notes Via GIFT City Boost The Stock Market?

The stock market is in a bull phase with both the benchmark indices — Sensex, Nifty50 – touching new highs every week. The market which is constantly looking for a trigger to scale to new highs seems to have got a big one. According to Mint “Participatory notes are poised for a comeback, this time through the International Financial Services Centre, Gift City, Gujarat, after nearly a decade of being discouraged by Indian regulators. Some leading global banks that currently issue P-Notes from global jurisdictions, such as Singapore, are considering shifting to GIFT City as the special economic zone offers both tax sops and regulatory clarity.”  The return of P-Notes will be like music to the ears for the stock market players. According to The Hindu Business Line report “foreign investors had patronised P-Notes for 14 years between 2004 and 2018. At the peak, P-Note linked investments in India stood at around Rs 4-lakh crore. But P-Notes lost their charm after SEBI restricted its use and banned them completely in the derivatives segment.” Currently, India is parched for foreign money in stock markets and allowing P-Notes could act like steroids, experts say. On a net basis, the foreign portfolio investors sold Indian equities worth more than $20 bn in 2022. Tax arbitrage has forced FPIs to move to other jurisdictions.