Investments in domestic capital markets via participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by Sebi to curb inflow of illicit funds.
P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.
Prior to that, the total investment value through P-notes stood at Rs 1.75 lakh crore in January-end and Rs 1.57 lakh crore in December-end.
The quantum of FPI investments via P-notes remain unchanged at 6.6 per cent in March.
It had asserted that consistent tightening of norms has made these instruments less attractive.
The board of Sebi is expected to further tighten the norm next week by barring resident Indians, NRIs and entities owned by them and from investing via P-notes in a move to curb possible round tripping.
The Special Investigation Team (SIT) on black money, set up by the Supreme Court, had recommended a slew of measures including the need for Sebi to come up with stricter regulations on P-notes, which are often viewed as a route for channelising illicit funds.