Monsoon Capital LLC, a $1.2 billion hedge fund firm run by Gautam Prakash, has been hit hard by a slump in Indian stocks this year as overseas investors pull back from emerging markets in the wake of trouble in the U.S. The Monsoon India Inflection Fund LP has dropped 28.3% this month, through March 20. That leaves it down 45.9% so far in 2008, Prakash wrote in an update to investors. MarketWatch obtained a copy of the letter. The Monsoon India Inflection Fund 2 LP is down 26.8% so far in March and is off 44.4% so far this year, Prakash reported. India's Sensex Index has dropped more than 26% so far this year. More than half of that slump has come so far in March, with the benchmark off almost 15%. Shares of smaller Indian companies have done even worse, with the BSE Mid Cap Index down 23% this month and 41% so far in 2008. The BSE Small Cap Index has plunged 26% this month and 47% year-to-date. The performance of Monsoon's hedge funds and the broader Indian market show how vulnerable developing markets are to the waxing and waning of risk appetite among investors in developed countries.   more »

Dubai-headquartered Baer Capital Partners is planning to launch two India-dedicated hedge funds this year despite the bearish sentiment ruling the bourses since January-end. The two funds - Beacon India Opportunities Fund with a corpus of $400 million and the $100 million Beacon India Growth Fund - will invest in listed companies. Baer is in the process of securing the regulatory approval for foreign institutional investor (FII) licence. “Our shareholders have already lined up money for the Beacon India Opportunities Fund. This fund will invest mainly in mid-cap stocks. Investors will have the redemption option if they give a three-month notice at the month end. None of these funds would be involved in momentum trading, which is usually practised by hedge funds,” said Alok Sama, president and founder, Baer Capital Partners. Baer Capital’s move comes after several leading hedge funds received approval from the Securities and Exchange Board of India (Sebi) in recent weeks.   more »