Should investors lap up or ignore SBI Energy Opportunities Fund?

India’s largest fund house, SBI Mutual Fund, has launched a thematic fund to bet on the country’s energy segment

- Jash Kriplani

India's energy landscape seems to be getting some fairly deserved attention, particularly from fund houses. India's largest fund house-SBI Mutual Fundrecently launched a thematic fund focused on the energy space. The SBI Energy Opportunities Fund will invest in stocks that belong to the energy sector to take advantage of rising energy demand.

How it works The fund will invest in a mix of traditional and new energy businesses.

"Traditional energy companies are incubating new energy businesses.

Because of policy reforms, the profit pools of traditional energy companies are increasing and it is much more predictable. And that will lead to value creation, when this new cash flow is put to use for new energy business," says Raj Gandhi, fund manager at SBI MF.

To be sure, oil and gas exploration and production giant Reliance Industries has planned ₹75,000 crore of capex for new energy business.

Recently, oil producer ONGC and power firm NTPC entered into a joint venture agreement to set up offshore wind energy projects.

The SBI fund will be benchmarked against the Nifty Energy Index, which has delivered 20% annualized returns over a five-year period (as of 31 January), as against 14.9% annualized returns delivered by Nifty 50 Index in the same period.