Investment through Participatory Notes (P—Notes) into India’s capital market grew to over Rs 2.58 lakh crore (about $39 billion) at the end of October.

P—Notes, mostly used by overseas HNIs (High Net Worth Individuals), hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered foreign institutional investors (FIIs).

This saves time and cost for them, but the flip side is that the route can also be used for round—tripping of black money.

According to SEBI data, total value of P—Notes investment in Indian markets (equity, debt and derivatives) increased to Rs 2,58,287 crore at October—end, from Rs 2,53,875 crore in the previous month.

This was the second successive month when investment through this route increased.

The total outstanding value of P—Notes witnessed a steady rise since January and the momentum continued till March.

However, investments through this route registered a drop in April, but hit a seven—year high in May. The inflows slipped in the subsequent three months (June—August) but marginally rose in September and again grew in October.

Till a few years ago, P—Notes used to account for more than 50 per cent of total FII investment, but their share has fallen over the years after SEBI tightened disclosure norms and other related regulations.

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