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India-focused hedge funds are lagging in performance because of lack in shorting opportunities

Tuesday, October 27, 2015

Komfie Manalo, Opalesque Asia:

The lack of shorting opportunity in India has left India-focused hedge funds at the mercy of the stock market. Indeed, latest data from Singapore-based Eurekahedge said that India hedge funds posted the third-lowest returns in the Asia-Pacific region in the first nine months of 2015 gaining only 3.22%, following a 39% rise in 2014.

A report by Bloomberg showed that the sudden reversal of fortune of Indian hedge funds highlights the risks faced by hedge fund managers who seek to profit in both a bull and bear markets. It added that hedge funds in India are tracking the local stocks more closely than in any of the world’s major markets. And the trend is expected to linger because of the lack of opportunity to profit with falling equities and selling shares short.

Sumeet Nagar, a Mumbai-based managing director of the $250m Malabar India Fund managed by Malabar Investment Advisors said, "Shorting is a very important tool for an investor. But the set of opportunities is limited, so the criticism is valid that you don’t have that many short options in India."

Publicly-listed stocks on the Bombay Stock Exchange were traded on average 59,000 times per day over the past 100 days. The fi......................

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