In October 2007, when the benchmark indices were hitting new highs on a weekly basis – the Sensex took just four sessions to rise from 18,000 to 19,000 points – the market regulator was worried.

The then-Chairman of the Securities and Exchange Board of India ( Sebi ), M Damodaran took a big call – he proposed to ban fresh issuances of participatory notes (P-notes), ordered winding up of existing positions within 18 months and capped the investment limit to 40% of the foreign institutional investors’ assets.

After the proposal, the Sensex fell 1,700 points on a single day, forcing then-Finance Minister P Chidambaram to step in and say that P-notes, the most popular in the overseas derivative instrument (ODI) category, won’t be banned completely.

Eighteen years later, Damodaran’s wish

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