Market estimates Rs 5,000 cr unwinding on Monday, Tuesday. Participatory note (P-note) holders investing in India may have trimmed their positions by Rs 5,000 crore, according to market estimates, as the Indian market fell up to 12 per cent in Monday and Tuesday trading sessions. The Securities and Exchange Board of India (Sebi) has restricted P-note investments in the derivatives market and asked investors to unwind their positions within 18 months. At the same time, the regulator has permitted P-note investments in the cash market up to 40 per cent of FIIs’ assets under custody. An incremental 5 per cent increase in P-note investments has been allowed, subject to the 40 per cent level. P-notes are offshore derivatives instruments (ODIs) issued by FIIs to anonymous investors, who do not come under Sebi’s supervision. “Roughly 34 FIIs and sub-accounts issue P-Notes which form around 50 per cent of assets under FII. Assuming that most, if not all, pulled out… we think around Rs 5,000 crore still cannot be ruled out,” said Manish Jain, vice-president, structured products group, Atherstone Capital. Another fund manager said: “P-note holders have unwound their positions. But, that is because of redemptions from overseas investors due to US subprime woes.” According to stock exchange figures, FIIs sold a net of Rs 7,200-crore on the first two days of this week in the cash segment. However, in the derivatives segment, FIIs were net buyers for Rs 8,774 crore — interpreted as an arbitrage play by the overseas funds.   more »

Recent stock market drops hurt some of the world's most famous hedge fund managers, who have long attracted money with promises that they could sidestep even the worst conditions. Bruce Kovner's Caxton Alpha Equity fund, Lee Ainslie's Maverick Fund and Leon Cooperman's Omega fund rank among the $2 trillion hedge fund industry's prominent losers in the first days of 2008, according to people who have seen the numbers. The average global hedge fund lost 3 percent through the end of last week, according to Hedge Fund Research data, and that was before global markets plunged on Monday, when indexes fell 7.2 percent in Germany and 7.4 percent in India. U.S. markets were closed on Monday. U.S. hedge funds specializing in stocks were off 5 percent on average through last Friday, according to data from New York-based Hennessee Group, which invests in hedge funds and tracks their performance. "This month is going to be the worst start to the year for hedge funds in a very, very long time," said Charles Gradante, a principal at Hennessee. In fact hedge funds, loosely regulated portfolios that became hugely popular with endowments and pension funds over the last decade on promises to protect against declines, have never lost more than 1 percent in the first month of the year since Hennessee began tracking the data in 1993.   more »