Indian stock markets have been witnessing a bloodbath of late, and India-focused hedge funds, which earlier were pushing up the market to unprecedented heights, are now looking to benefit from the slide by going short on India, reports say.
Many are doing so by borrowing shares from foreign institutional investors and then dumping those shares in the market. So far in 2008, foreign investors have sold a net USD6.5bn worth of shares, and a sizeable portion of those sales are believed to have been made by hedge funds, according to the Economic Times.
But experts are unsure whether the recent spate of sales by hedge funds stems from redemption pressure or market strategy. With credit concerns governing investment decisions, many hedge funds now have a lower risk tolerance that is driving sentiment across the globe. This, coupled with weakness in stock markets and the economy, probably justifies the sentiment at the recent Gaim conference, where global macro and market neutral strategies were viewed as the way forward in this uncertain climate.
On that note, GLG Partners, the hedge fund manager run by Noam Gottesman and Emmanuel Roman, has hired Driss Ben-Brahim from Goldman Sachs to run its emerging markets special situation hedge fund and steer its macro trading platform. It will be interesting to see if the new recruit also goes short in the subcontinent.