Investments in the Indian capital markets through participatory notes (P-notes) increased slightly to Rs 90,580 crore at the end of April, as foreign investors are shifting allocation from China to India amid a significant economic slowdown in the most populated country.

P-notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.

According to Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets -- equity, debt, and hybrid securities -- stood at Rs 90,580 crore at April-end, compared to Rs 87,979 crore in March.

In February, the investment reached Rs 89,143 crore against Rs 87,989 crore in January.

Sonam Srivastava, the founder of Sebi-registered investment advisor Wright Research, said the investment via P-notes rose last month from March, as FPI were net sellers in Indian markets in April with a negative flow in both equity and debt segments.

"The rationale for this slight increase could be that foreign institutional investors are shifting allocation from China to India given the significant economic slowdown in China, or that the IPOs which came out in April pulled in foreign investors. So, there is a tiny up move from March numbers but seeing strategic foreign hedge funds take positions in India is exciting," she added.

Manoj Trivedi, co-founder, Jama Wealth, Sebi-registered investment advisor, said these are legitimate instruments. They can be potentially used for money laundering purposes. When Indian markets are buoyant, there has been an effort to bring P-Notes within regulatory jurisdiction, but controls have been lifted when capital inflows have been plummeting.

"Given that FPIs have been net sellers in the market for some time, there seems to be an uptick in investments through P-notes.

It probably points to overseas investors continue to look at India as an attractive investment destination, but just want to ensure that they do not get stuck with regulatory compliance in case there is a need to make a quick exit," Srivastava said.