Lone Pine, 55 FIIs sign up with Sebi

Lone Pine Capital and Traxis Partners are among 56 overseas funds that registered to buy shares in India in July, the most in six months, betting on a recovery in stocks.

Helios Capital Management and Stonewater Capital also won approvals from the nation’s regulator, the Securities and Exchange Board of India (Sebi), nine months after authorities forced hedge funds to register.

India’s stock market recovered its $1 trillion (around Rs 42,00,000 crore) in market value last month, helped by the biggest drop in commodity prices in 28 years. The new funds may help reverse record sales of stocks by overseas investors that led to the biggest first-half slump in the Sensex since its 1979 creation.

“India is one of the bigger beneficiaries of commodity and oil weaknesses as money flows from commodity-producer countries to =consumers,’’ said Samir Arora, who oversees $1 billion at Helios Capital Management in Singapore and received Sebi’s approval on July 21. “FII selling has normally marked a bottom, it will be the same again.’’

Investments in emerging markets, including India, may help revive returns in the $1.9 trillion hedge fund industry that’s heading for its worst year in two decades after bets on US financial stocks backfired. Banks and brokerages have written down $493 billion and raised $353 billion in capital since the start of 2007 as the US subprime-mortgage market collapsed.

Caxton Associates, a $11-billion fund started by Bruce Kovner, and Daniel Loeb’s Third Point are among the 293 funds approved to buy shares in India this year, according to Sebi’s web site. That’s 20 per cent of all registrations since the market was opened to foreign investment 15 years ago.

West Asian investors including the Brunei Investment Agency, the Abu Dhabi Investment Council and Qatar Insurance can also buy equities in India for the first time as they seek greater returns on their oil earnings. The Gulf Cooperation Council states, which together pump about one-fifth of the world’s crude oil, earn more than $1.2 billion a day from oil sales.

The Bombay Stock Exchange’s Sensex has gained 21 per cent since falling to a 16-month low on July 16, as oil declined by 22 per cent from its July 11 peak. India was the only market among the so-called BRIC nations — Brazil, Russia, India and China — that gained in the past month as the MSCI Emerging Markets Index slumped to its lowest in almost a year.

“The major factor behind the rally in Indian stocks is the price of oil,’’ said Uri Landesman, who oversees international equities at ING Investment Management in New York. “If oil continues to fade, and I think it is likely we see $110 before $125, Indian stocks will continue to outperform. If, however, oil heads back up, Mumbai will plummet.’’