FUND VIEW - Taurus bets on builders, power firms

By Nishant Kumar

MUMBAI (Reuters) - India's power and construction firms are good bets because their robust order books are set to get even better as the Congress-led government boosts spending on infrastructure, said the manager of India's best performing fund in 2009.

Mohit Mirchandani, head of equity at Taurus Asset Management, said he was overweight on the two sectors as funding woes had eased, and many of these firms had up to three years of order books and stood to benefit from softer commodity prices.

Inventories of expensive raw materials, built when commodity prices peaked around mid-2008, have gradually been exhausted by the end of March quarter. So there will be no such inventory cost impact on profits in June quarter, he said.

"On a go-forward basis, you will only see margin expansion," Mirchandani, who manages about 3 billion rupees for Taurus, one of India's smallest fund houses, told Reuters in an interview.

"They are running at full capacity just to meet the existing business," Mirchandani, whose bets include power equipment maker Bharat Heavy Electricals, Crompton Greaves and engineering and construction firm Punj Lloyd, said.

His Taurus Infrastructure Fund has seen returns rising more than 84 percent in 2009, the highest by an Indian fund this year, and far more than the nearly-52 percent gain in the benchmark index, helped by bets such as Aban Offshore, Mahindra & Mahindra and Gammon India.

Outlook for Indian infrastructure firms has seen dramatic change after the Congress-led coalition won an unexpectedly strong mandate in April-May general elections, raising expectations of a revival in stalled reforms.

Mirchandani, who joined Taurus from ING's India fund unit in February, said he was also betting big on mid- and small-cap stocks in the infrastructure space as their valuations were far more attractive than their large-cap counterparts.