The finance ministry, in response to a Parliament question, has not ruled out that a lot ofblack money is flowing into the stock market. 

Suspicious transactions reported by mutual funds, depository participants and stock brokers have shown a 40% growth in the last one year, with the Securities and Exchange Board of India (SEBI) simultaneously carrying out investigation in many such cases. 

The number of cases of market manipulation and price rigging registered and investigated by the regulator between 2009 and 2011 has been more than 190, according to the finance ministry. Probe has been completed in 164 cases. 

"Several steps have been taken to prevent dirty money/black money from flowing into the stock markets," the government said. For instance, the payments for transactions in the stock markets are made through banking channels. Banks and other financial intermediaries are also required to ensure compliance with the customer due diligence norms as required under the Prevention of Money laundering Act (PMLA), the finance ministry said in a written response. 

The other reporting intermediaries registered with the Sebi such as mutual funds and stock brokers, besides banks, insurance companies and casinos routinely make suspicious transaction reports (STRs) and file them with the financial intelligence unit ( FIU), which analyses and forward them to intelligence agencies concerned for further action. 

In a bid to further tighten the regulatory mechanism, Sebi has sought to be included in the list of enforcement agencies for facilitating receipt of e-mails and call data records from telecom companies. 

The government and regulator are keeping a close watch on the kind of money that gets invested in the stock market especially after suspicions were raised about the presence of terror funds in the system. 

There are different routes adopted to invest black money in the markets. Using participatory notes by companies registered in tax havens are one such way. (Times of India)