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Billionaire global investor Soros goes contrarian, signals a buy

Billionaire global investor George Soros has turned contrarian on the Indian stock market, which has seen stocks being beaten down over the past few weeks.

His hedge fund Quantum, which was reported to have posted earnings of over 30% last year, went on a buying-spree at a time, when most funds were dumping stocks in a sliding market.

On July 4, Quantum Fund bought a 3.8% equity in Jain Irrigation Systems, and close to 1% of the holding of Jai Corp for a value consideration of Rs 167 crore. Since February, the fund has made investments valued at close to Rs 600 crore, or $ 140 million, in various companies, including Indiabulls Financial Services, Indiabulls Real Estate and Kalindee Rail Nirman.

Quantum’s selective stock picking comes at a time, when institutional investors have been pulling out a large chunk of money amid concerns over a combination of factors such as weak global markets, soaring global oil prices and spiralling inflation in India. “Hedge funds normally are active, when there is some momentum in the market. Quantum may be trying to do some value-buying, but one has to see how long the fund stays invested, given the prevailing uncertain market conditions,” said a stock broker.
George Soros is famed for betting against the British pound in 1992 and making over $1 billion in the process, bruising the Bank of England (BoE) which fought a losing battle, ending up drawing down its reserves. Much later, he was attacked by former Malaysian Prime Minister Mahathir Mohamad for speculating in currencies of South-East Asia. Indeed, Mr Soros had also lent money to Russia during troubled times.

Among his latest acquisitions in India, Mr Soros bought a fresh stake of 3.8% in Jain Irrigation for Rs 121 crore. The stocks were bought at Rs 442.9 per share against the current market price of Rs 483.

The stock appreciated 5.4% despite a flat movement in the Sensex during the past week. Apart from Quantum, a few other leading funds — Citigroup, Morgan Stanley, Goldman Sachs and FID Funds —hold individual stakes ranging between 1.7% and 5% in Jain Irrigation.

Mr Soros also picked up a small stake of 0.9% in Jai Corp at Rs 282 against Friday’s closing of
Rs 372. The scrip, in fact, has vaulted 27% in one week, outperforming the market by a wide margin.
In the past, the legendary investor had picked up stake in many other companies, and is known to have invested several million dollars across sectors.

Two Indiabulls group companies — Indiabulls Financial Services and Indiabills Real Estate — are notable examples of Quantum’s recent acquisitions. The fund held 2.2% and 3.6%, respectively, in the two companies as on March 31, 2008. It also owns a 7.1% stake in Kalindee Rail Nirman, of which 6.8% was bought for Rs 32 crore in February.

Hedge fund inflows are expected to have slowed down significantly, with the stock market turning extremely bearish after the biggest bull run in the Indian stock market that ended in January 2008.

Since hedge funds mostly operate as sub-accounts of foreign institutional investors (FIIs), their activity is also reflected in the flows of foreign portfolio investors on Indian bourses. These investors have pulled out funds aggregating Rs 30,000 crore, or $7 billion, of Indian equities while the Sensex crashed 7400 points, or 35%, from its peak of 20873 on January 8.

Source: Economic Times

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