Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly ?

The correct answer is D) Participatory Note. A P-Note (also called an ODI, or Offshore Derivative Instrument) is issued by a registered FPI (earlier, FII) to an overseas investor who is not registered with SEBI. The instrument is linked to underlying Indian securities, so the investor gets market exposure without direct registration. SEBI regulates this under the FPI Regulations, 2019, which restrict who can receive ODIs and tighten KYC and disclosure.

Why the others are wrong:

• A) Certificate of Deposit: a money market instrument issued by banks and financial institutions to raise short-term funds. It is not a market access route.
• B) Commercial Paper: an unsecured short-term instrument issued by corporates to raise working capital. It is a debt instrument, not a tool for foreign investors to enter equities.
• C) Promissory Note: a written unconditional promise to pay, governed by the Negotiable Instruments Act, 1881. It is a general credit instrument with no link to FPI access.

Core concept: P-Notes sit within the FPI framework and are a key source of foreign portfolio flows. In Mains, they come up in discussions on capital account management, opacity of beneficial ownership, and the risk of hot money.

Trap: aspirants mix P-Notes with ADRs/GDRs, which are issued by companies through depositories. P-Notes are issued by FPIs to unregistered investors.