Sensex crashed 1500 points within 20 minutes of opening trade onWednesday, October 17, 2007.
Thanks to SEBI wanting to introduce restrictions on participatory notes ( P-Notes) .
What went wrong with P-Notes
Participatory notes are instruments issued by FIIs to entities that want to invest in the Indian stock market. Registered FIIs with SEBI can issue, hold or deal with P-Notes. Its a simple Derivative contract. FIIs issue these notes to investors abroad with details of scrips that can be bought and if the buyer agrees, they deposit the funds with the overseas branch of the FII.
FII will then close the transaction here by buying shares in India in its own account.So the details of the real investor is not known at any time.
FUNDS routed through participatory notes account for almost 42 per cent of the $8.3 billion invested by FIIs in the Indian securities market so far this year.
SEBI has proposed to curb Foreign Institutional Investors from issuing P-Notes for which it has sought public comments over the next four days. It has sent its draft proposal to major investment banks asking their opinion.
As part of the proposals, SEBI has suggested directing FIIs to wind up their current positions in P-Notes over the next year and a half, during which the regulator would review the position from time to time.
This has not been received well in the market.
Bad days are not over...It depends on SEBIs decisions.......
Suguna
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