SBI Energy Opportunities Fund is Good or Bad? Expert Review
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India’s energy sector boom has greatly benefited energy funds like the SBI Energy Opportunities Fund. The scheme is growing rapidly with the increasing demand in the power sector.
For instance, “The demand for power consumption in FY 2023 grew by more than 9%,” which helped the scheme achieve a massive AUM worth Rs.9,940 crores within a year of its launch.
But does this mean that you should also invest in the scheme without thinking twice? Of course not.
So to help you decide upon the scheme, this SBI Energy Opportunities Fund review assesses the fund’s most recent performance and analyzes its portfolio in a detailed manner.
And in this review, you will also learn about the expert. It also talks about the fund manager and the future growth prospects of this scheme. Let’s get started then.
SBI Energy Opportunities Fund: The Story So Far
Launched in May 2024, the scheme is managed by SBI Mutual Fund. The category of the fund is “open-ended equity,” and it deploys your money in companies belonging to the energy sector.
The investment objective of this fund is to provide you with long-term capital appreciation while specifically investing in companies that are part of:
- The oil value chain, such as oil exploration and production, refineries etc.
- Power ancillaries that make heavy electrical equipment or other.
- Gas value chain, such as gas transmission and city gas distribution.
- The green energy sector like solar, wind power and others.
- The Coal Value chain, such as coal production, generation of power, etc.
Initially, the SBI Energy Opportunities Fund NAV (Net Asset Value) was set at Rs.10 only. And this attracted investors who were confident about the future growth of the energy sector mutual funds.
Although they did earn some good returns from the fund, however since this scheme is very new amongst its peers, it is important to understand how it performed against its benchmark.
SBI Energy Opportunities Fund vs Nifty Energy TRI
The SBI Energy Opportunities Fund has been giving negative annualized returns of 2.35% since its inception.
But then what is so great about it? You will know, first take a good look at the graph below:
Did you notice the towering difference between the negative annual returns of both the fund and its benchmark, Nifty Energy TRI?
Although the average return of the SBI Energy Opportunities Fund is currently negative, you should not forget that the scheme was launched only a few months ago.
And despite being such a new mutual fund scheme, it is about to cross the mark of Rs.10,000 crores worth AUM (Asset Under Management). It will attain vertical growth once it completes a few market cycles.
Must Read: How Energy Sector Mutual Funds Are Transforming Ordinary Portfolios?
Furthermore, when people like Mr. Raj Gandhi are handling the fund, it will surely reach great heights. But wait, who is he? And what is so special about him?
Expert Mind Behind SBI’s Growth
Mr. Raj Gandhi is the lead fund manager and has been handling the scheme since its launch. He is a certified CFA (Chartered Financial Analyst) and has been working in financial markets for over 17 years.
He specializes in managing Mutual Funds in categories like commodities and energy sectors. And he is best known for picking companies with strong fundamentals.
He holds these companies for long durations to generate maximum returns through the compounding effect. Mr. Gandhi’s rich experience enables him to successfully implement a highly effective investment strategy.
Barbell Investment Strategy
This strategy focuses on deploying money in both traditional as well as new energy and power utility companies. Such an optimum mixture of companies provides you with risk-adjusted returns on your systematic investment.
Pro Tip: Know your future returns using the SIP Calculator within seconds.
Nonetheless, as they say, “Actions speak louder than words”.
Let us not waste any more of your time and analyze the SBI Energy Opportunities Fund portfolio managed under Mr. Gandhi. This will tell you how good he is at his work.
Portfolio Analysis of the SBI Energy Opportunities Fund
To analyze the overall quality of the portfolio, we will have to analyze three key measures:
1. Asset Allocation
The scheme invests 96.4% of its assets in equity stocks and 3.52% in cash and its equivalent stocks. The following graph depicts their share in the pie:
Investing such a large chunk of assets in equity stocks is showing the scheme’s dedication to generating maximum returns.
2. Market Cap Allocation
The largest share of the market cap allocation is held by large cap stocks which is around 57%. And the scheme has invested nearly 35% of its assets in mid cap stocks and 8% in small cap stocks.
Large cap stocks holding such a large share means you will get stable returns from your SIP investment.
3. Sector Allocation
Falling under the Energy Mutual Funds category, the scheme has invested most of its assets in the energy and utilities sector which is around 69%. And it has invested 18.27% of the funds in the industrials.
You can refer to the graph below to get further details regarding the sector allocation.
Such a diverse sector allocation is necessary to protect your portfolio from the harmful impacts of market fluctuations.
Based on the above analysis, it is evident that the SBI Energy Opportunities Fund is dedicated to providing you with risk adjusted returns to achieve its objective of creating long term capital appreciation.
So far we have got the following insights:
- the returns are up to the mark
- the fund manager is extremely talented
- the portfolio is well diversified
But are these factors enough to tell that the scheme will certainly grow in the future?
Well, we cannot ignore that being a thematic fund, the SBI Energy Opportunities Fund holds a very narrow scope for growth. So why should you believe that the fund will give you great returns in the future?
What is the Future of the SBI Energy Opportunity Fund?
A straight answer to this question is yes, the future for the scheme is very bright. And the following trends of the energy sector in India will tell you why:
- The electricity generation in India is growing at an annual rate of 6.80% which is attracting innovations in the sector.
- The Indian power sector presents an investment opportunity of Rs 40 lakh crores in the next 10 years.
- The government of India has also unveiled a comprehensive plan worth over Rs 9 lakh crores to enhance its power sector.
- India’s energy market is expected to become the second largest in the world by 2050.
After reading such promising growth prospects of the energy sector, you cannot sit back, relax and watch others make huge capital gains.
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But wait, before you start investing, first understand the suitability of this scheme for you. When it comes to money, making hasty decisions is not considered wise.
Who Should Invest in the SBI Opportunities Fund?
If you are an investor with:
- High risk appetite
- Long term investment horizon
- Keen interest in the energy sector
Then this opportunity fund can be that one opportunity for you to attain your long term financial goals whether it is purchasing a home or securing the future for your children.
This review has provided you with enough insights into the scheme. This will help you decide whether the SBI Energy Opportunities Fund is good or bad for you. Now, let us conclude the review with final thoughts on the scheme.
Smart Investments, Bigger Returns
To Conclude SBI Energy Opportunities Fund Review
To wrap it up, investments in the SBI Energy Opportunities Fund is a good alternative that will shape a new direction for your current portfolio, also backed by a reputed mutual fund house, SBI Mutual Fund is a plus. Also, the minimum amount to start a SIP (Systematic Investment Plan) is just Rs.500.
In our expert opinion, by investing in this energy fund, you will get a lot of growth potential and scope for making high returns as your money will be invested amongst diversified areas like, oil, gas, electricity, power-related services and green energy sectors.
Now, why is this exciting? Well, these sectors have a lot of opportunities to grow, which means there's a good chance that the money invested in the fund will also grow.
For example, as more electric cars are used, the demand for electricity and batteries (part of the green energy sector) will go up.
This will lead to higher returns for investors in these areas. So, this fund is like planting money in different parts of the energy world, hoping each part will grow and make your overall investment bigger over time.
