FUNDVIEW-India bull says earnings re-ratings in sight

* Indian P/Es attractive, sector focus important

* Likes beaten-up banks, autos, avoiding oil, textiles

By Martin de Sa'Pinto

ZURICH, July 7 (Reuters) - Indian corporate earnings growth could bounce to 20 percent this fiscal year, wrong-footing many analysts who will have to revise estimates upwards, one fund manager told Reuters on Wednesday.

Bramaprakash Singh, who manages the $20 million Beacon India Alpha Equity fund for Dubai-based Baer Capital Partners, said many analysts are forecasting earnings for the year to March 2010 ranging from a fall of 4 percent to a rise of 4 percent.

"Investors need to ask what stock market levels local money can sustain when foreign money leaves. In the last four or five cycles, markets have formed a bottom around a price-earnings ratio of nine or 10," Singh said, noting the market is not far off those levels now.

Beacon India was launched in August 2008. It was up 15 percent by May this year, against a 9.4 percent decline in the dollar-weighted MSCI India index.

Singh said strong earnings growth would draw in new investors despite the Indian market's high volatility, as earnings can underpin values and hence cushion potential losses.

Many of Beacon's positions have been well-timed contrarian bets on companies like State Bank of India (SBI.BO), Tata Motors (TAMO.BO) and tractor maker Mahindra & Mahindra (M&M) (MAHM.BO).

"We have now sold Tata and reduced our positions in banks. We have kept M&M since we are almost in the monsoon season, which could boost the stock," Singh said.

"Valuations at fertiliser companies like Tata Chemical (TTCH.BO) are far ahead of performance," he said, speaking by telephone from Mumbai.

"We expect the company to report very good earnings growth, but it is out of favour on valuation. We still hold it, but won't be increasing our stake."

The fund is currently avoiding textiles companies because of low demand, increasing inventory, high cotton prices and difficult credit conditions.

It is also avoiding oil product marketers like Hindustan Petrol (HPCL.BO) as they may not be able to recoup operating costs with oil prices hovering around $70.

(Editing by Jason Neely)