Why Tata Resources & Energy Mutual Funds Could Be a Valuable Addition to Your Investment Portfolio

India is on the brink of an energy revolution. **As the third largest consumer of energy in the world, India is making significant investments to satisfy its growing demand for energy while working towards sustainable energy alternatives. In this dynamic landscape, energy sector mutual funds could be a smart investment choice, offering both growth potential and a commitment to the planet's future. 

What are Energy Sector Mutual Funds?

Energy Sector Mutual Funds are sectoral funds that primarily invest in energy and resources sector. This includes but not limited to investments in oil, gas, and renewable energy stocks and companies engaged in solar panels, turbines, other heavy machinery, civil infrastructure products, metal and commodities, etc. 

Now, you might be wondering, what are sectoral funds? Sectoral mutual funds invest in stocks of specific sector or industry.

Tata Resources & Energy Fund is one of the notable funds in this category, investing primarily in equity and equity-related instruments in commodities, energy, and utilities macro-economic sectors. Its allocations are evenly poised between growth and value stocks, as well as cyclical and non-cyclical businesses.

Why Invest in Energy Sector Mutual Funds?

As the country aims for more industrial and infrastructural growth, energy usage increases. This bears good news for traditional resources and energy stocks in India, as well as renewable energy mutual funds. 

The reasons that make energy and resources mutual funds attractive include -

1. Growth potential - **India’s per capita energy consumption is only about a third of the global average. There is considerable scope for potential returns, as energy consumption signifies economic growth.   
    
2. Focus on renewable energy - ***India is aiming its renewable energy installed capacity to 500GW by 2030. This will be spread across hydro projects, wind, solar, biomass, and waste-to-energy projects. Tata Resources & Energy Fund has allocations in companies with renewable energy ventures.   
    
3. Expert investment - Energy fund stocks are identified and curated by seasoned mutual fund managers with years of expertise and track record. The fund manager of Tata Resources & Energy Fund, Satish Chandra Mishra, has 17 years of industry experience. He has been handling the oil and gas, metals, mining and chemical industries / sectors for the company since 2017. He was awarded the best energy stock picker in 2017 by Starmine.    
    
4. Exposure diversification - By adding energy mutual funds to your portfolio, you diversify your exposure and risk. Tata Resources & Energy Fund, for instance, has allocated two-thirds of its funds to oil and gas, power, construction materials, and metal and mining. However, it also gives you exposure to industries like chemicals, capital goods, textiles, FMCG and realty.    
    
5. Commodity and metal demand - As India pushes for rapid economic growth through better transport networks, smart cities and housing for all, the demand for inputs like metal and resources is bound to increase. Tata Resources & Energy Fund invests in construction materials and metals and mining stocks.

Quick Checks Before Investing in Energy Mutual Funds

• Check the fund's historical performance, fund manager’s track record, expense ratio, and other terms and conditions
• Check the fund’s assets under management and the composition of its holdings
• Study your existing portfolio, particularly to see your current exposure to clean energy stocks
• Calculate your diversification, assuming you invest in a renewable energy mutual fund
• Plan your investment while keeping your investment outlook in mind.

How to Invest in Energy Sector Mutual Funds?

Let’s learn more about the investment process using the Tata Resources & Energy Fund as a reference. 

Before investing in the Tata Resources & Energy Fund, you must decide if you want to start an SIP or invest a lump sum amount. In the case of a monthly SIP, decide the instalment amount, the monthly instalment date, and the duration of the SIP. The minimum SIP investment in Tata Resources & Energy Fund is ₹100, while it is ₹5,000 in lump sum. After that, you can start your investment in this energy sector mutual fund by clicking on ‘Start Investing’.

The Tata Resources & Energy Fund Advantage

The Tata Resources & Energy Fund regular growth plan offers a well-researched balance between growth and value stocks, as well as cyclical and non-cyclical businesses.

Tata Resources & Energy Fund gives you an opportunity to gain exposure to top companies and diversifies across sectors like energy, power, metal, construction, chemical, etc. You can redeem your funds at any time and for no redemption cost, as the 0.25% exit load is waived after 30 days of allotment.

Conclusion

The energy sector, including renewables, is set to play a pivotal role as India fortifies its infrastructure capabilities and continues its march towards becoming a developed economy. Investing in energy mutual funds potentially offers a unique growth opportunity. However, it is an exposure to a single sector and must be balanced with other types of investment. Additionally, for any new investment, you must consider your financial objective and risk appetite as an investor.

Scheme Details

• Scheme Name: Tata Resources & Energy Fund
• Scheme Category: Equity Scheme-Sectoral
• Scheme Type: An open-ended equity scheme investing in Resources and Energy Sector.
• Fund Manager: Satish Chandra Mishra
• Min. Investment Amount: 
  • Minimum amount for Lumpsum: Rs 5,000/- and in multiple of Re.1/- thereafter
  • Minimum amount for SIP: Rs 100 and in multiples of Re 1/- thereafter
• Load Structure: 
  • Entry Load: Not Applicable 
  • Exit Load: 0.25% of NAV of redeemed/switched out before 30 days from the date of allotment. Applicable tax on exit load, if any, shall be paid out of the exit load proceeds and exit load net of tax, if any, shall be credited to the scheme.

Scheme Risk-O-Meter

Benchmark Risk-O-Meter

• Long Term Capital Appreciation   
   
• Investment in equity/equity related instruments of the companies in the Resources & Energy sector in India

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them

It may be noted that risk-o-meter specified above is based on internal assessment. The same shall be updated as per provision no. 17.4.1.i of SEBI Master Circular on Mutual Fund dated 27.06.2024, on Product labelling in mutual fund schemes on ongoing basis.

*Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Sources:

** https://pib.gov.in/PressReleseDetail.aspx?PRID=1883915

*** https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1913789