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Hornbill Orchid Fund, an India-focused firm partly owned by one of China's oldest private equity managers, Orchid Asia, is raising $250 million for a long-short fund, Hornbill Orchid managing partner Manoj Thakur said.
Hornbill Orchid Fund plans to buy into high-growth companies and short companies with weak business models to capitalise on strong foreign investor interest in India, Thakur said.
Indian shares hit a record high on Tuesday after an unexpected cut in interest rates from the central bank raised optimism about a pick-up in economic growth.
"It is the right time to get into the market as inflation is slowing down and the supply-side constraints are being removed. We see a huge appetite from overseas investors for Indian equities," Thakur told Reuters.
He did not disclose how much Orchid Asia would own in the Hornbill Orchid Fund, which had been raised with contributions from wealthy families and institutions across the United States and Europe.
Thakur said he was especially optimistic about sectors that would benefit from domestic consumption given expectations for a recovery in the economy after two consecutive years of below 5 per cent growth.
Other sectors Thakur said he was examining were technology, healthcare and companies that would benefit from increased urbanisation.
"With falling inflation, real wages are going up. We are therefore bullish about the domestic consumption theme. We believe that the drop in fuel prices will benefit urban consumers more than rural consumers," he said.
Thakur resigned last year as head of the private equity unit of domestic financial firm Avendus Capital to start Hornbill Capital.
Overseas investors have been big boosters of Indian shares, with net purchases of $16.1 billion in 2014, exchange and regulatory data showed. Foreign institutions have put $977.3 million so far this year, the data showed.
Sentiment about India has improved after the Reserve Bank of India began focusing on inflation and amid hopes for reform from Prime Minister Narendra Modi's government.
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