Mutual funds now romance core sector

Birla Sun Life joins bandwagon by launching infrastructure-dedicated fund.

Mutual funds are betting big on the infrastructure sector in the coming years. The airport modernisation plan accompanied with a general boom over the last few years has made the sector promising, thereby increasing the prospects.

Birla Sun Life on Wednesday launched new fund dedicated to infrastructure-development and related companies. Principal PNB had also launched a similar fund about three weeks back.

"According to the government projections, projects worth around Rs 40,000 crore have already been approved for the five years," said A Balasubramanian, chief investment officer, Birla Sun Life.

The fund, with a threshold investment of Rs 5,000, will be open till the 27th of next month. Balasubrahmanian said the changed political scenario put the companies engaged in infrastructure development and related segments on the high-way to growth.

"For a long time, there has been very little investment in the sector owing to fiscal deficit. Now there has been a change in the government's approach to the area," he said.

"From a publicly funded approach, we have come to a privately funded one, opening up enormous potential to these companies. Unlike in the past, the government's role will be that of a facilitator or a regulator rather than the funding agency," he added.

Among companies which are likely to see their business volumes increase tremendously are L&T, Gammon and capital equipment manufactures such as BHEL, Siemens and Crompton among others, say fund-managers.

"From a situation where current orders were sufficient for these companies to keep them busy for two years, we have come to one where orders already booked will last four years now," said S V Prasad, CEO, Birla Mutual Fund.

According to the company's research, infrastructure spending is likely to go up from the current lows of around 3.5 per cent of GDP to around 4.7 per cent over the next three years, driving sectors such as cement, capital goods, transport and auto to new profits.

Prasad feels that the factors that kept spending in this sector low till now will no longer be valid, turning a crisis into an opportunity to quick growth for the companies.

"The government won't have to spend the money which will come from private players, and the requisite regulatory infrastructure has already been built up. Besides, if we are to sustain growth at 8 per cent levels, there is no way outside infrastructure-growth, as has been recognised by the government also," he points out.