Issues In Participatory Notes Introduction
The moment one recalls the word, Participatory Notes, it sends shivers across the mind of any ordinary Indian or an ordinary Indian investor. Participatory notes were one of the reasons for the largest fall witnessed ever in Indian stock markets. Participatory notes had been in news for all the wrong reasons, every second or third day, some or the other controversy associated with them props up. The most important regulators in Indian economy, i.e. SEBI and RBI are also seen in picture, day in or day out, issuing notices or warning signs to the parties concerned or related to this instrument. But the analysts associated with stock markets are not much concerned or bothered about this instrument. As some of them, don’t have any relationship with this instrument. Indeed, this instrument is much talked about when we name or see the Foreign Institutional Investors (FIIs).
Although FIIs have contributed to the Indian economy, in more ways than one, but still they have not been able to earn the respect for themselves as they should be. RBI and SEBI, every now and then, are bothered about their activities and moves that might affect the economy and the markets adversely. The recently out, Lahiri Committee Report, also lays emphasis on participatory notes, its role and functioning. The question that arises in a person’s mind is that what is a participatory note, how it functions, and why is it famous for its notoriety, etc. We will try to seek the answers of the above said questions and various other aspects of participatory notes in the following discussion. What are participatory notes?
In the magazine, Business World, dated December 15th, 2003, the feature on participatory note stated that, “The past month has seen our stock market regulator, the Securities and Exchange Board of India (SEBI), nervously rattling its