With stock prices in a free fall, India-obsessed hedge funds that were pushing up the market to dizzying levels are now looking to benefit from the slide by going short on India. Many of them are said to be doing so by borrowing shares from foreign institutional investors (FIIs) allowed to issue participatory notes, and then dumping those shares in the market. So far in 2008, FIIs have net sold $6.5 billion worth of shares, and a sizeable portion of those sales are believed to have been punched in by hedge funds. Market observers are not sure if the recent bout of sales by hedge funds is a result of redemption pressure or arising from a certain market strategy. “The five to 10-year picture still looks good. It is the next 6-12 months which is a question mark,” said Parth Gandhi, MD of Vision Global Investments, a hedge fund. He is of the view that for a long-only fund, the equities market at these levels provide attractive bargains. “The trick is to identify one’s risk profile and thereafter look at individual stock positions one has,” he added.   more »

China is depressing the carbon credit business by only proposing projects under the clean development mechanism (CDM) and not implementing them in a hurry, and trading the credits in the futures market. As a result, India, despite having the world’s highest number of projects registered under the CDM, is getting less for its carbon credits. While India has 333 of the world’s total of 1108 CDM projects, China has 234. Sudipta Das, partner for Risk Advisory Services at Ernst & Young, said many Chinese companies are indulging in carbon futures and selling CER at a much lower price without even registering a project with the designated authority. This is happening because of a loophole in the norms for transacting carbon credits. While the spot market prices for a CER or certified emission reduction is at above euro 20, the future prices are quoted at around euro 10-12. Future trading in carbon at present is more sensible as it is being considered as an asset class, observers said. Observers feel that with the emergence of carbon as an asset class for hedge funds, clean-tech venture capital and private equity investors, segmenting carbon bonds into primary and secondary CERs has become important, as it would give rise to a broker class. According to European market projections, by 2012, CER prices are expected to go up to euro 22.96 from around euro 20.88 at present.   more »