The total value of P-note investments in Indian markets (equity, debt and derivatives) in November was Rs 2,49,210 crore ($39 billion). Prior to that, investment through P-notes had hit nearly seven-year high of Rs 3.23 lakh crore in October.
P-notes, mostly used by foreign high net worth individuals, hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered foreign institutional investors.
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This saves time and costs for investors but the flip side is that the route can also be used for round-tripping of black money.
The quantum of FII investments through P-notes dropped to 10.5 per cent last month from 11 per cent in November. Till a few years ago, P-notes used to account for more than 50 per cent of the total FII investments but their share has fallen after Sebi tightened the disclosure norms and other regulations for such investments.
P-notes have been accounting for about 15-20 per cent of the total FII holdings in India since 2009, while it used to be much higher -- in the range of 25-40 per cent -- in 2008.
It was as high as over 50 per cent at the peak of Indian stock market bull run during 2007.
Earlier in November, Sebi directed foreign investors to ensure compliance with all necessary norms before issuing such notes with immediate effect amid concerns about possible misuse of offshore derivative instruments, or P-notes, for money laundering and other such purposes.