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

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  • Manmohan Singh
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    Abstract

    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.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21508
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/291.

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    Length: 13
    Date of creation: 01 Dec 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/291

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    Related research

    Keywords: Hedge funds; Foreign investment; hedge; derivative; capital gains; capital gains tax; stock exchange; bond; capital markets; equity markets; hedges; capital flows; hedging; capital inflows; international capital markets; futures trading; bond market; futures markets; futures positions; stock futures; international capital; derivative markets; short-term capital; bond issue; capital account convertibility; derivative instruments; futures exchanges; hedge fund; stock exchanges; new york stock exchange; local bond; equity market; commodities futures; current account deficit; sale of securities; local bond markets; financial institutions; hedging strategies; equity exposure; options markets; currency risk; foreign exchange hedges; equity inflows; bond markets; hedge fund strategy; debt securities; portfolio investment; local bond market;

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    Cited by:
    1. Ajay Shah & Ila Patnaik, 2008. "Managing Capital Flows: The Case of India," Working Papers id:1570, eSocialSciences.

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