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A Hedge Fund Goes Long on India Stocks Even as Fear Spikes

Bloomberg logoBloomberg 3/12/2020 Anto Antony

(Bloomberg) -- A veteran hedge fund manager is going long on Indian stocks even as fear of further losses among the nation’s equity investors surged to a record as the stocks head for the worst weekly fall in more than 12 years.

“Asset prices typically do not fall in straight lines without some retracement, and hence currently, we have pivoted to a net long stance from being defensively net short for the past several months,” Vijay Krishna Kumar, head of Liquid Alternatives investment at IDFC Asset Management Co.

a screenshot of a cell phone: Fear and Greed indicator shows Indian stock investors are scared as never before © Bloomberg Fear and Greed indicator shows Indian stock investors are scared as never before

Measures across the globe to fight the coronavirus outbreak continue to undermine prospects for corporate earnings and raise the scepter of a funding crisis, leading to the biggest rout in equities since 2009. Making things worse, in India, the central bank seized embattled lender Yes Bank Ltd. last week, raising the danger of a credit market crisis.

Top India Hedge Fund Hoards Cash as Market Sell-off Rumbles On

Kumar, who began managing long-short strategies at London-based AGRA India Fund in 2006, is buying at a time when India’s largest hedge fund -- Avendus Absolute Return Fund -- is hoarding cash following a spike in volatility. Kumar manages two long-short funds -- IDFC India Equity Hedge Tactical Fund and India Equity Hedge Conservative Fund -- under IDFC’s alternate strategies.

Meanwhile, a drop in oil prices after Saudi Arabia slashed its official crude pricing over the weekend could make India -- a net importer of the commodity -- more appealing to foreign investors. They’ve sold a net $2.1 billion of shares so far in March, after six straight months of inflows.

Stocks in India Enter Bear Market, Rupee Near Record Low on Rout

“A risk-on mode can come back into this market at any time as the system is flush with global liquidity as rates collapse and investors look favorably at India owing to Brent’s collapse,” Kumar said. “We are adding to our value and dividend-yielding investments in sectors like tobacco, energy, and utilities.”

(Updates chart and adds data on sale by foreigners in the fifth paragraph)

To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net

To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net, Margo Towie, Ravil Shirodkar

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©2020 Bloomberg L.P.

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