By Netty Ismail May 15 (Bloomberg) -- Sanjiv Duggal<http://search.bloomberg.com/search?q=Sanjiv+Duggal&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>, the HSBC Holdings Plc asset manager who predicted the rebound in Indian stocks this year, said the hedge fund he manages has eliminated bullish bets on equities due to the uncertain outcome of the elections.
India’s ruling Congress party-led coalition and the main opposition-led group may have each failed to secure enough votes to form a government, based on exit polls after a five-week election that ended May 13. “The risk is high from a market perspective, and that’s why we’ve taken down our exposure,” Singapore-based Duggal, who oversees $4 billion of Indian equities, the world’s largest such holding outside the nation, said in an interview yesterday. “The risk near-term is predominantly election driven.” Duggal’s Halbis India Alpha Fund<http://www.bloomberg.com/apps/quote?ticker=HSHINAD%3AKY>, with assets of more than $90 million, was at its most bullish level in March, before a rally in the nation’s stocks began. Its net exposure -- the difference between bets that stocks would rise and wagers they would fall -- was at the maximum of 40 percent. The portfolio has brought down its net exposure to “zero” because of “uncertainty over election results,” he said. Indian stocks <http://www.bloomberg.com/apps/quote?ticker=SENSEX%3AIND> fell yesterday after exit polls indicated no single political party will win enough votes to form the next government ahead of the official count on May 16. Recent Rally Speculation that a coalition led by the opposition Bharatiya Janata Party, called the National Democratic Alliance, might win the elections contributed to the market’s recent rally, Duggal said. The benchmark Sensitive Index, or Sensex, climbed 57 percent in dollar terms from its March 9 low to May 12. “The risk-reward is not favorable in the near term,” following “the fastest 50 percent rally” in India since 1991, when the nation started opening its economy to the world, Duggal said. “Three to four months ago, market participants were expecting the worst case scenario,” which was a government that wasn’t led by either the governing United Progressive Alliance or the National Democratic Alliance, he said. Government spending, which was increased ahead of the election, will also likely slow, Duggal said. Indian Prime Minister Manmohan Singh may need support from regional parties to continue ruling the world’s largest democracy. Six television networks forecast the ruling alliance led by Singh’s Congress party may emerge just ahead of its chief rival. CNN-IBN predicted Congress and its allies will get as many as 205 seats compared with a maximum 185 for the opposing coalition. Star News-Nielsen and News X gave the Congress-led bloc 199 seats to 191 for the BJP-led group. Previous Elections Duggal said he predicted five years ago that the BJP-led block was unlikely to get re-elected, contrary to market expectations. “This time around, it’s a lot tougher to take a call,” he said. There’s a less than 10 percent chance that the Third Front, a loose coalition of smaller parties including the Communists, would win the elections, Duggal said. After the last elections, the Sensex plunged 11 percent on May 17, 2004, as investors feared that Communist allies in the new government would slow the pace of reforms. The Halbis India hedge fund will reassess its portfolio after the elections, depending on the outcome, he said. It’s set to attract funds from existing and new clients, following withdrawals in the fourth quarter of last year. “Given the volatility in the market, we are a lot more active in managing our positions compared with the first 18 months of the fund’s life,” he said. “We’re not expecting outflows going forward.” The fund, which targets a gross annual return of 20 percent, gained 13 percent this year. http://www.bloomberg.com/apps/news?pid=20601091&sid=aspRT0CrhPbY&refer=india -- God gave me nothing i wanted, He gave me everything i needed. Swami Vivekananda --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
