New Delhi: Investments in domestic capital markets through participatory notes fell to a four-month low of Rs1.68 lakh crore at the end of April amid stringent norms put in place by Sebi to curb the inflow of illicit funds.

P-notes are issued by registered foreign portfolio investors (FPIs) 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.

According to the Securities and Exchange Board of India (Sebi), the total value of P-note investments in Indian markets — equity, debt and derivatives — declined to 1,68,545 crore at April-end, from ,78,437 crore at the end of March. This was the lowest level of investment through the route since December, when the cumulative value of such investment stood at .57 lakh crore.

At the end of February, the total investment value through P-notes was at Rs1.70 lakh crore and Rs1.75 lakh crore in January.

Of the total, P-note holdings in equities were at Rs1.09 lakh crore at April-end and the remaining were in debt and derivatives markets. The quantum of FPI investments via P-notes plunged to 6% at the end of last month from 6.6% in March.

Last month, the board of Sebi had tightened the norm by barring resident Indians, NRIs and entities owned by them from making investment through P-notes. The decision was part of efforts to strengthen the regulatory framework for P-notes, which have been long seen as being possibly misused for routing of black money from abroad.

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.

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