Sebi's move to relax P-Note norms has helped Morgan Stanley P-Note holders to transfer their holdings as the counter party risk aversion continues to be higher. Would this have been the prime reason for this relaxation so that P-Notes holders who were with Bear Sterns and Lehman Brothers and now perhaps with Morgan Stanley would want to go to safer havens and therefore this limit had to be removed? CNBC-TV18's Nimesh Shah answers:

Here is a verbatim transcript of Nimesh Shah's comments on CNBC-TV18. Also watch the accompanying video.

One of the prime reasons was that for some of the larger FIIs or FII brokerages the cap of 40% was almost breached and they were not be able to further transfer the P-Note from one P-Note holder to another P-Note holder and that’s precisely the reason why Morgan Stanley holders are shifting their position from Morgan Staley P-Note to other P-Note holders.

P-Note holders shifted Morgan Stanley equities worth Rs 150 crore since SEBI relaxed P-Notes norms and have moved their holdings to prominent midcaps stocks like Nahar Industrial, Vimta Labs, Madhucon Projects, Monnet Ispat, S Kumars. Rs 150 crore may not look big but one needs to remember that these stocks have corrected more than 50% in the last one month or so and there is a lot of risk aversion or counterparty risk with Morgan Stanley. This is why some of the jittery investors are moving out their holding.

There are many other P-Note holders as well apart from Morgan Stanley P-Note holders. Taking these stocks also into concern, close to Rs 500 crore of equity has already been moved out from not only Morgan Stanley but other P-Note holders as well post this SEBI announcement.