Imagine a world where your investments don’t just grow—they fuel the future. You may enter Energy Mutual Funds, the powerhouses of the investment landscape in India. These funds channel your money into the dynamic energy sector, from traditional oil and gas giants to renewable trailblazers in solar, wind, and green hydrogen.
With India’s energy demands skyrocketing and the government’s push for sustainable power, energy mutual funds are your ticket to tapping into this high-voltage growth story. Whether you’re a fan of the steady reliability of traditional energy or excited about the eco-friendly promise of renewables, these funds let you profit from India’s energy evolution.
The Growth of Energy Sector in India Over the Last 10 Years
Over the past decade, India’s energy sector has experienced significant growth, marked by a substantial increase in renewable energy capacity. As of May 31, 2023, the country’s installed renewable energy capacity reached 179 GW, with solar and wind energy contributing 67 GW and 43 GW, respectively (ITA). This expansion aligns with India’s commitment to sustainable development and its efforts to meet rising energy demands through cleaner sources. Additionally, India’s energy consumption has doubled since 2000, reflecting the nation’s economic growth and improved living standards (IEA, Financial Times).
Source: Derived from aggregated data reported by the Ministry of New and Renewable Energy (MNRE), Government of India (GoI)
The above trend line is showing the growth of India’s renewable energy installed capacity over the last 10 years. The chart highlights a steady increase from 30 GW in 2013 to 179 GW in 2023, reflecting India’s commitment to expanding its renewable energy infrastructure. Despite this progress, challenges remain in balancing energy security, affordability, and environmental sustainability.
Let’s Have a Look at The Growing Popularity of Power Sector or Energy Funds in India
The growing popularity of power and energy funds in India mirrors the rapid transformation of the country’s energy sector. With the Indian government targeting 500 GW of renewable energy capacity by 2030 (MNRE), investor interest in this sector has surged. Power sector funds provide an attractive opportunity to participate in this growth, channeling investments into companies driving innovation in solar, wind, and other clean energy sources, as well as traditional energy infrastructure. The push for energy security, sustainability, and technological advancements has made these funds a preferred choice for investors seeking long-term returns while supporting India’s energy transition.
Are you ready to supercharge your portfolio? You may invest in energy mutual funds today and light up your financial future!
Knowing the popular Energy funds in India can help you diversify your investment channels.
Top 6 Energy Mutual Funds with 1-year Returns
| S. No. | Name of the Fund | 1 Yr return (%) | TER (%) | Fund House |
|---|---|---|---|---|
| 1 | DSP Natural Resources & New Energy Growth Direct Plan | 17.58 | 0.99 | DSP Mutual Fund |
| 2 | Tata Resources & Energy Growth Direct Plan | 14.08 | 0.58 | Tata Mutual Fund |
| 3 | DSP Global Clean Energy FoF Growth Direct Pla | 5.41 | 1.54 | DSP Mutual Fund |
| 4 | ICICI Prudential Strategic Metal & Energy Equity FoF Growth Direct Plan | 1.77 | 1.38 | ICICI Prudential Mutual Fund |
| 5 | SBI Energy Opportunities Growth Direct Plan | NA | 0.59 | SBI Mutual Fund |
| 6 | ICICI Prudential Energy Opportunities Growth Direct Plan | NA | 0.43 | ICICI Prudential Mutual Fund |
Source: Kuvera; December 31, 2024.
The table indicates the following:
1. Top Performers
The DSP Natural Resources & New Energy Growth Direct Plan leads the list with a strong 1-year return of 17.58% and a moderate TER of 0.99%, making it attractive for investors seeking high returns with reasonable costs. The Tata Resources & Energy Growth Direct Plan follows, offering a solid return of 14.08% with a lower TER of 0.58%, highlighting its cost efficiency.
2. Focus on Clean Energy
The DSP Global Clean Energy FoF Growth Plan reflects the growing interest in global clean energy investments, with a 1-year return of 5.41%. However, it has a relatively higher TER of 1.54%, which may influence cost-conscious investors.
3. Conservative Returns
Funds like ICICI Prudential Strategic Metal & Energy Equity FoF Growth provided a modest 1-year return of 1.77% with a TER of 1.38%, catering to investors with a preference for diversified energy and metals exposure.
4. TER with No Returns Reported
Funds such as the SBI Energy Opportunities Growth Direct Plan and ICICI Prudential Energy Opportunities Growth Direct Plan do not report a 1-year return but have low TERs of 0.59% and 0.43%, respectively, potentially making them cost-effective options for long-term investors.
5. The data for some funds is missing due to their newer launch.
The Benefits of Energy Funds in India
Energy funds in India offer several key benefits including:
- promoting the transition to renewable energy sources like solar and wind, which helps reduce dependence on fossil fuels;
- contribution to energy security by diversifying energy supply and supporting sustainable growth;
- funding clean energy projects, these funds also reduce carbon emissions, aligning with climate goals;
- investments in the energy sector create jobs, stimulate local economies, and drive technological innovation.
Moreover, energy funds support government initiatives, such as the National Solar Mission, and attract foreign investments. Overall, they play a crucial role in enhancing India’s energy infrastructure and supporting environmental sustainability.
When Investing in Energy Funds You Should Be Careful About the Following
- It’s important to be aware of market volatility, as energy prices can fluctuate due to geopolitical and supply-demand changes;
- Regulatory risk is also significant, as government policies can directly affect the profitability of energy projects;
- Technology and environmental risks must be considered, particularly in emerging renewable sectors or fossil fuel ventures that may face opposition;
- Rising interest rates can increase borrowing costs for energy projects, impacting returns;
- Energy funds may have limited liquidity, making it harder to exit investments quickly.
Wrapping Up
From the above analysis, we can conclude that energy mutual funds present a unique opportunity to invest in India’s evolving energy sector, combining stable returns from traditional oil and gas with the high-growth potential of renewable energy. As India’s energy demands soar and sustainability takes center stage, these funds allow investors to profit while supporting the country’s green energy transformation. Investing today offers both financial growth and a chance to fuel a sustainable future. However, ensuring proper diversification and evaluating the fund’s management are crucial for mitigating these risks.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Rebalancing for Mutual Fund Investors
