Participatory Notes

Is our Government and the Regulatory Authorities,RBI and SEBI working for the FIIs !?…at our expense…surely looks like it !

Just Look at some of the SEBI released figures on outstanding position of shares lent by FIIs for selling…the aggregate outstanding Participatory Note based lending position as on October 8,2008 was Rs 6493 crs across 224 stocks if you assign Prices as of this date

However the shorting  build up began even earlier…before October…The Sensex itself opened in October at 13056 and has been down hill since then…This would mean that the real value of Short sells by FIIs is over Rs 10000 crs…closer to US $ 3 Billion…some of this position may yet be open…which means short covering will lead to pull back rallies like we saw on Friday

Clearly on short covering,some of it yet remains to be done,the Profits have been in excess of US $ One Billion !…It’s an October Orchestration,facilitated by SEBI, which one can be awestruck and marvel in scale but shame at in it’s immorality,unethicality and even illegality 

I’ve taken the October 27,2008 Sensex Closing Low of 8510 to make a point  to show the extent of the Gains made on Short Covering   

If You recall that RBI had a year ago made a startling revelation that most of the FII Inflows ,75% of them, were actually Hot Money

Now with SEBI yet going soft on Participatory Notes,although it had imposed restrictions under moral pressure,  it yet allows anybody,even those Indians,with concealed loot in Swiss Banks,to play India through Registered FIIs,without the need to have their identity disclosed

FII’s have even perfected the misuse of such PNs to capitalise on lax Indian laws and regulation…Shares Held by Them in one Sub Account under PN are lend to another to sell…The Borrower later buys these shares back at lower rates,as in these times,from the Indian Markets and returns them to the Lender…making a cool difference without actually owning the shares and paying just the rental for them or possibly a part of the profits made…and moreover these gains are not subject to or hardly subject to taxes as the entities reside in tax havens

So FIIs are allowed

• this lending Operations through PN Routes
• Tax Free Gains

Indian Investors do not have the benefit to either…and have to face the reality of a Capitulated Indian market that shrinks their portfolio Value significantly..Oh ! they can hedge using Futures and Options,but are subject to Margins and Taxes on Derivative Gains read more