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What challenges do you see for a scrum master while he moves to PO role? Also are there any suggestions and recommendation for smooth transition?

I'd see more opportunities than challenges. A PO who has done time as an SM would probably be invaluable, in so far as they understand the mechanics of agile delivery, what a team can reasonably commit to, and the rules of engaging with the team.

The biggest challenge would be gaining the trust of the customer and other stakeholders. A PO has to be able to represent all of them, and with full authority to act on their behalf. Without that respect, the PO is likely to find his role undermined.

My view on this:

1. How good was the SM at really truly being an SM? (Maybe they were a cr@ppy SM but don't know it)
2. How good will the new PO be at *NOT* trying to act as the SM? (i.e. allow the SM to executive their role effectively)
and most importantly
3. In terms of "what are good characteristics of a PO" -- how does this former SM measure up?

Assuming he was an above average SM if not good. As a PO should he do a first level mentoring for the new SM?

And if he is going to be PO for the same team then the team may still look up at him as SM, how can he isolates himself from team's expectation?

I think now SM to PO needs to a mind setup change. SM is facilitator for the SCRUM to succeed while PO is the owner of the product/project. Their vision towards the project would change - however knowing earlier SM role experience he would know the team better. If required, new PO can train upcoming SM if required.

SM role is process centric while PO is SME centric. PO is authoritative (defining done during review) while SM is following as per book of rule/stands.

Is anyone aware of PSPO course happening from Scrum.org in India in Apr or May?