Fueling Tomorrow: Invest in the Baroda BNP Paribas Energy Opportunities Fund

Jan 22, 2025

Baroda BNP Paribas Mutual Fund has launched Baroda BNP Paribas Energy Opportunities Fund, it is an open-ended fund of fund scheme equity scheme investing in energy companies.

India's energy sector is a cornerstone of its economic growth, presenting immense opportunities driven by rising urbanization, industrial expansion, and increasing energy consumption. With the government targeting a renewable energy capacity of 500 GW by 2030 and achieving net-zero emissions by 2070, the sector is undergoing a rapid transformation.

Investor interest in India's energy sector has surged due to its alignment with global decarbonization trends and the government's push for self-reliance in energy production.

[Read: Are Sectoral and Thematic Funds Worth Adding to Your Portfolio in 2025?]

The launch of the Baroda BNP Paribas Energy Opportunities Fund NFO comes at a pivotal time, offering investors a chance to participate in India's energy revolution. By providing exposure to companies across the energy spectrum, this fund aims to leverage the ongoing transition and the sector's growth potential.

Details of Baroda BNP Paribas Energy Opportunities Fund:

Investment Objective The investment objective of the Scheme is to provide investors with opportunities for long term capital appreciation by investing in equity and equity related instruments of companies engaging in activities such as exploration, production, distribution, transportation and processing of traditional & new energy including but not limited to industries/sectors such as oil & gas, utilities and power.
The Scheme does not guarantee/indicate any returns.
Category Sectoral/Thematic Fund
SIP/STP/SWP Available
Min. Investment Rs 1,000/- and in multiples of Re 1 thereafter. Additional Purchase Rs 1,000/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
Entry Load Nil Exit Load For redemption/switch out of units more than 10% of units, within 1 year from the date of allotment - 1% of applicable NAV.
For redemption/ switch out of units in any other case NiL
Plans Direct
Regular
Options Growth
Income Distribution cum Capital Withdrawal (IDCW)
Income Distribution cum Capital Withdrawal (IDCW) Mr Sanjay Chawla
Mr Sandeep Jain
Benchmark Index Nifty Energy TRI
Issue Opens: January 21, 2025 Issue Closes: February 04, 2025
* The Scheme does not offer any Plans/Options for investment.
(Source: Scheme Information Document)

What will be the investment strategy for Baroda BNP Paribas Energy Opportunities Fund?

Baroda BNP Paribas Energy Opportunities Fund will invest 80% of its net assets in companies belonging to the Energy theme. The Scheme will invest upto 20% of its net assets in companies other than those engaged in Energy theme. The Scheme may also invest a small portion of its corpus in money market instruments to manage its liquidity requirements.

The Scheme will be actively managed and will follow a bottom-up approach to stock-picking and choose companies which are expected to benefit from the growth in the Energy space. The Fund Manager will have the discretion to invest in all those sectors / areas which are engaged either directly or indirectly in the traditional & new energy sectors.

Traditional energy includes but is not limited to sources of energy such as crude oil, natural gas, coal and new energy refers to renewable energy such as hydropower, solar, wind among others.

(Source: PPT - Baroda BNP Paribas Energy Opportunities Fund)

In addition, the Scheme can also invest in domestic/ overseas securities of companies that are engaged in energy allied sectors including but not limited to Chemicals & Petrochemicals companies, industrial & capital goods companies that are engaged in energy consultancy, manufacturing pipelines used in energy sector, manufacturing electrical equipment's for production, transmission & distribution of energy, companies engaged in bio energy value chain, companies making components of new energy, ancillary companies in power transmission & distribution space.

How will the scheme allocate its assets?

Under normal circumstances, Baroda BNP Paribas Energy Opportunities Fund will hold an allocation of 80% to 100% in Equity and equity related^ instruments of companies in the Energy and allied sectors, 0% to 20% in Equity and equity related^ instruments of companies other than those in the Energy and allied sectors, 0% to 20% in Debt & Money Market instruments, 0% to 10% in Units of Mutual Funds and 0% to 10% in Units issued by REITs & InvITs.

Should investments in Baroda BNP Paribas Energy Opportunities Fund be considered?

The Baroda BNP Paribas Energy Opportunities Fund focuses on the energy sector, offering exposure to a theme that is vital to global and domestic economic growth. This sector-specific fund invests in companies involved in conventional energy (like oil and gas) and renewable energy (like solar, wind, and bioenergy). As the global energy transition picks up pace, such funds hold the potential to deliver substantial returns over the long term. However, the fund's performance is closely tied to the energy sector's dynamics, making it suitable only for investors with a high-risk appetite.

One of the key reasons to consider this fund is the rising focus on renewable energy and sustainability. Governments and corporations worldwide are committing to net-zero goals, and India has a strong renewable energy pipeline. This creates opportunities for companies operating in solar, wind, and green hydrogen, which could benefit the fund. Moreover, India's expanding energy demand, driven by urbanization and industrial growth, can make the energy sector attractive for long-term investment.

However, sector-specific funds like this come with inherent risks and the performance may go downhill if the sector moves out of favour. The energy sector can be volatile due to factors like fluctuating oil prices, regulatory changes, geopolitical tensions, and technological disruptions. For instance, while renewable energy is growing, traditional energy sources like oil and gas are still subject to global price volatility, which can impact fund returns.

Investors need to assess their risk tolerance and align their investments with their financial goals before considering such funds. Additionally, understanding the fund manager's strategy and expertise in navigating energy sector complexities is crucial.