P-notes investment drops to Rs 1.70 lakh cr at February-end

Investment through the route has been declining since September last year when it was at Rs 2,12,509 crore. It fell to Rs 1,99,987 crore at October-end and further to Rs 1,79,648 crore in November.

Market experts believe that inflows through P-notes could further drop as new tax treaty with Singapore and Mauritius will come into force from April 1 this year under which capital gains tax shall be levied at the source of investments.

Mauritius and Singapore are among the top sources of foreign direct investments into India and also account for a big chunk of total inflows into the country's capital markets.

Of the total, P-note holdings in equities were at Rs 1.08 lakh crore at February-end and the remaining were in debt and derivatives markets.

The quantum of FPI investments via P-notes dropped to 6.6 per cent in February, from 7.1 per cent in the preceding month.

Last month, markets regulator Sebi had said steps taken by it on P-notes are "sufficient enough" to address the concerns of SIT on blackmoney, but the regulator is open to further suggestions.

It had asserted that consistent tightening of norms has made these instruments less attractive.

The Special Investigation Team (SIT) on blackmoney, 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.