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 »