The Finance Ministry has constituted a working group to look at various types of foreign inflows which are taking advantage of arbitrage opportunities across the respective stand alone regulations.
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Arbitrage is the practice of taking advantage of a price differential between two or more markets and involves the process of buying stocks and bonds in one market and immediately sell them in another market at higher prices.
The Panel will study arrangements relating to use of participatory notes (PNs) and suggest any changes required to increase transparency. PNs are instruments used overseas investors who invest in the Indian stock markets with out registering themselves with the market regulator. Hedge funds which invest through PNs borrwo money cheaply from overseas markets and invest these funds into stocks emerging markets.
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