I saw some interesting videos (PART-1, https://www.youtube.com/watch?v=b-LPpxN19Uk), (PART-2, https://www.youtube.com/watch?v=494dTjRd5Jo) which explains how mutual funds cant short,cant sell and sit on cash seeing the money coming into market, even if they stocks are over valued they will have to buy as they are bound to do so. which simply makes the market risky, so what i wanted to know is when the fund managers feel if the stock can take a hit can they hedge with any kind of derivative instrument , if not ,what else can they do?
Yes, They Do.
Anton Kreil, Having worked on the professional side of trading at Goldman Sachs, Lehman Brothers and J.P. Morgan. He has well explained about this.
i have watched that video, he explains how brokerages and hedge funds trade derivatives, but i am asking about India mutual funds, the money which goes through SIP.