Investments through participatory notes (P-Notes) into India’s capital markets declined to an 18-month low of Rs 2.18 lakh crore at the end of February, amid sluggish equity markets.

P-Notes, which are mostly used by overseas HNIs (high net worth individuals), hedge funds and other foreign institutions, allow investors to invest in Indian markets through registered foreign portfolio investors (FPIs), the key driver of Indian markets.

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, the total value of P-Notes investment in Indian markets (equity, debt and derivatives) has been falling since October. It had declined to Rs 2,17,740 crore at the end of February from Rs 2,31,317 crore in the previous month.

Total value of P-Notes investment in Indian markets stood at Rs 2.58 lakh crore, Rs 2.54 lakh crore, Rs 2.35 lakh crore and Rs 2.31 lakh crore in October, November, December and January, respectively. It was Rs 2.54 lakh crore in September.

Of the total, P-Note holdings in equities were at Rs 1.32 lakh crore at February-end and the remaining holdings were in debt and derivatives markets.

The January figure marks the lowest level since August 2014, when the cumulative value of such investments stood at Rs 2.11 lakh crore.

The quantum (percentage) of FII investments via P-Notes rose to 10.7 per cent in February from 10.5 per cent in the preceding month.

Meanwhile, the benchmark Sensex plunged 7.5 per cent during the period under review.

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