New Delhi, Oct 26 (IANS): Participatory Notes, or P-Notes, mode investment into India's capital markets grew to Rs.254,000 crore (around $39 billion) at the end of September compared with the previous month, according to data by market regulator SEBI.

Securities and Exchange Board of India data showed that earlier investment through P-Notes has been declining in the June-August period after touching a seven-year high of Rs.285,000 crore in May. This was the highest investment since February 2008, when the cumulative value stood at Rs.323,000 crore.

The total value of P-Notes investment in Indian markets increased to Rs.253,875 crore at September-end, from Rs.253,310 crore in the previous month.

The drop in investment via P-Notes cames after the Supreme Court-appointed Special Investigation Team (SIT) on black money asked SEBI to review its regulations to help identify the end-users.

P-Notes, mostly used by overseas individual investors, hedge funds and foreign institutions, allow investors to invest in Indian markets through registered foreign institutional investors (FIIs).

These used to account for more than 50 percent of total FII investment in India till a few years ago, but their share has fallen after SEBI tightened disclosure norms and other regulations.

Currently, P-Notes make up around 15-20 percent of the total FII investment in India, as against around 25-40 percent in 2008.

The SIT on black money had recommended that the know your client norms for P-Notes be further improved.

However, the government has recently said it has no intention of putting an overnight ban on P-Notes and it is consulting the Reserve Bank of India and SEBI on the recommendations of the SIT.