Finance Minister Arun Jaitley has assured foreign investors that the government will take a pragmatic view and not restrict their participation in Indian stock markets as has been suggested by a Supreme Court-appointed Special Investigative Team (SIT). The Sensex fell by over 550 points on Monday fearing that the government may accept the SIT’s recommendation and put in place regulations to help identify unnamed foreign investors who participate in Indian stock markets though participatory notes (P-notes). Participatory notes are instruments issued to overseas individual investors to enable them to invest in stock markets without disclosing their identity to SEBI. The SIT held that such identification would help curb the menace of black money, an important electoral promise of the Narendra Modi government. The SIT is of the view that domestic black money is being reinvested in Indian markets through P-notes. However, the Finance Minister’s statement that it will study the SIT’s suggestions in details before talking a final decision helped calmed the market. “No steps will be taken that might adversely impact the investment climate in the country,” said Jaitley. Similar observations from SEBI chairman Upendra Kumar Sinha also reassured foreign investors. About a third of total foreign instutional investment in the Indian stock market comes through P-notes. “The government’s sensitivity on this issue proves that it does not want to annoy this class of investors,” says Phani Sekhar, fund manager with Karvy Capital. Sources say that the government will try to address the real issue behind the SIT’s recommendation, tackling black money, rather than putting in more regulatory restrictions. Sekhar is of the view that regulatory risks are the dominant features of any developing economy and therefore the efforts should be to minimise such risks.