Monday, October 17, 2005

P-notes: a simple derivative instrument to play in Indian markets

|| Businessworld - Play the game ||

Just read about these instruments which allow foreign investors to take part in the booming Indian stock market (and which allow for anonymity as well). SEBI seems to be a bit worried about these instruments, but heck, the market is booming, so who cares, right? Of course, Indian markets have always had distrust of financial engineering innovations, but this seems like a positive development.

Securities and Exchange Board of India (Sebi) has decided to allow hedge funds to operate in the Indian stock markets through the participatory notes if they conform to the guidelines being finalised by it.


Blogger derivativesgeek said...

I like your blog. The P Note piece is interesting. I would imagine that the Securities and Exchange Board of India would love the idea of International Speculators and Hedgers to have access to the Indian stocks. I think there are really two sides of the argument.

PRO: Indian stocks will additional exposure to outside interest which is always a good thing in capital markets & investment. Increasted contracts & open interest as well. Also, as I'm sure you already know, asset class diversification (geo-economically) is the trend now. The P Note could be combined with other instruments, into other structures, eventually providing investment possibilities within a developing economy.

CON: Excessive speculation, and regulatory issues. Of course if the exchange is well organized, and has a strong board with a strong knowledge base, and help from American/European management, I'm sure the P Notes will be successfull.

- derivatives geek aka quantphd

6:22 PM, October 25, 2005  

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