- The performance of energy funds depends on the movement of oil prices, economic condition and domestic demand
- Now as economic conditions and domestic demand are not good, is it good to put money in energy funds? Read this post and decide
There is a category of mutual funds that invest in specific themes. These funds are known as thematic funds. Energy funds are a kind of thematic funds, let us understand these better.
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What is Energy Thematic Mutual Fund?
As the name suggests, these are funds that invest in stocks of companies engaged in the energy and natural resources sector. The energy sector comprises companies engaged in the business of oil, gas and metals.
This is a very large sector in India since being a large country our energy sector-related requirements are very high. Most of the companies engaged in this sector are large corporations and are PSUs.
Some of the leading energy companies or energy stocks in India are Reliance Industries, Coal India, Tata Steel, Hindustan Zinc, HPCL, BPCL, GAIL, etc. There are only two mutual fund schemes that are dedicated energy and natural resources funds. Let us look at both these funds.
Best Performing Energy Funds
DSP Natural Resources and New Energy Fund
This fund is offered by DSP Fund. These are the key points to note:
- This fund was launched on 3rd Jan 2013 and has delivered an annualized return of 10.13% since launch.
- The benchmarks of this fund are MSCI World Energy Index, S&P BSE Oil & Gas Index and S&P BSE Metal Index.
- The current AUM is INR 272 crores.
- The portfolio comprises 18 stocks with 65% in large-caps and 35% in mid and small-caps.
Tata Resources and Energy Fund
This fund is offered by Tata Mutual Fund. These are the key points to note:
- This fund was launched on 28th Dec 2015 and has delivered an annualized return of 8.92% since launch.
- The benchmark of this fund is the Nifty Commodities Index.
- The current AUM is 31crores.
- The portfolio comprises 31 stocks with 39% in large-caps and 61% in mid and small- caps.
Returns of Energy Funds
The table below shows the returns delivered by these funds in % terms in a regular plan.
|Fund Name||Last 1 Year||Last 3 Years||Last 5 Years|
Should You Invest in Energy Mutual Funds?
As we can see from the above table, returns are not so good for these funds. This is because energy companies barring a few have not been growing consistently and generating good profits. The energy sector is dependent on the movement in oil prices, economic condition and domestic demand. When the economy is doing well, there is more demand for oil, gas and metals by manufacturing industries and households. In the current scenario when demand is suppressed, the energy sector is going through challenging times.
We recommend avoiding investment in these funds since it is a very narrow theme. There are hardly 15-20 companies listed in this space. Also, this sector is going through tough times and growth will be challenging in the near future. You should invest a major part of your equity portfolio in multi-cap funds that are more diversified. To know about the best multi-cap equity funds, you can read another post of ours- https://www.wishfin.com/mutual-fund/five-best-performing-multi-cap-funds-to-invest-in/