INDIAN ECONOMY ON ROCK-N-ROLL MODE: IMPLICATIONS
FOR HEDGE FUNDS
January 08 2004
WEST PALM BEACH, Florida (HEDGECO.NET)
–
Indian stock market Growth in 2003
2003 ended on a sound note in India as the Indian Stock Exchange in Bombay
closed up 1.88 percent at 6,026.59 points. The intra day high was 6034.38
points, about 100 points away from its life intra day high of 6150 points
reached in the month of February 2000. The market capitalization of Indian
stocks has doubled to US$280 billion during 2003. Such performance comes
as investors expect good earning figures, the earning season being just
around the corner. The rally was broad- based; however, the oil and gas
sector led the way.
The growth in the Indian Stock markets undoubtedly helped boost the Indian
economy to one of the fastest growing markets in the world. During 2003,
the Bombay benchmark rose by an incredible 72%, pushing the Indian market
to the number two position as the best performing market in Asia. Commenting
on the Indian market gains, Raamdeo Agrawal, managing director at Motilal
Oswal Securities said, “The most exciting phase is still ahead”.
Emerging Hedge fund market in India
Hedge funds, which have traditionally followed the money trail and market
action, are not very far behind. During the 2003 session, total hedge
fund assets flowing into the Indian market was about US$ 2 billion. Dharmesh
Mehta, head of equities with Enam Securities said, “Around 40 to
50% of the overseas money flowing into the Indian market is through participatory
notes, and most of it is coming from hedge funds”. Although the
Indian authorities continue to modernize its regulatory laws over hedge
funds, leading to some positive laws, hedge funds are still a cause for
concern not only for the country’s stock markets, but also for the
securities and Exchange Board of India [SEBI].
Unlike traditional mutual funds, which rely on a “buy and hold”
strategy, hedge funds move in and out of markets in anticipation of changes
and market imperfections, hoping to take advantage of such opportunities.
It should be noted here that hedge fund strategies are perfectly legal,
but emerging markets such as India or Malaysia have always viewed them
suspiciously.
During the previous Asian financial crisis, the former Malaysian leader,
Dr. Mahatier Mohammed charged that George Soros and other hedge funds
were responsible for the financial crisis facing his country, as well
as other Asian countries. However, an IMF investigation into the matter,
cleared hedge funds from contributing to the crisis. Expect increasing
hedge fund activities in India during 2004, no one should be surprised
to see total hedge fund investments in India reach US$4 billion mark.
Source: Paul Oranika
Editor-in-Chief
Hedgeco.Net
Paul is author of new book: "Hedge Funds: Investment Vehicles
for the global economy, what investors must know about them."
You can purchase the book through Amazon.com
by CLICKING HERE or by calling our office at 561-295-3709.
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