Energy Funds: An avenue for longer term investment

India’s energy sector is one of the most diversified sector in the world. We utilise various sources of power generation ranging from conventional sources such as coal, natural gas, oil, hydro and nuclear power to non-conventional sources such as wind, solar, and agricultural and domestic waste.

In recent years, electricity demand in the country has increased rapidly which is expected to rise consistently over the years. In order to provide for the increasing demand, massive capacity addition is required and the government is working out policies to help the energy sector.

By the end of February 2018, India had already reached around 19.58GW grid connected solar capacity and it is very close to the achieving its targeted of 20GW capacity. Recently, the Government of india has revised its target of grid connected solar capacity to 100GW. Bearing in mind all these aspects, the energy sector and thereby the energy funds are expected to perform well in the longer run.

In the past one year, the category of energy funds have given on an average returns of 22.96 per cent. We analysed the energy funds and their respective portfolio as on February 2018 and according to our analysis, Reliance Industries, Larsen & Toubro, Power Grid Corp of India have remained favourite stocks and all the energy schemes have invested in these stocks.

Going ahead, Apar Industries, Larsen & Toubro, KEC International are the stocks which attracted major investment among the energy funds. With the presence of these stocks and other aspects we see the energy funds to be an attractive investment avenue for the longer term.