Baroda BNP Paribas NFO to allocate 80% assets to India's energy sector

New fund offer closes on February 4 and requires a minimum investment requirement of Rs 1,000

Baroda BNP Paribas Mutual Fund has launched an open-ended equity scheme designed to leverage the "growth potential in India’s burgeoning energy sector", it said on Tuesday.

 

Baroda BNP Paribas Energy Opportunities Fund will be open from January 21 to February 4, 2025. It will be benchmarked against Nifty Energy TRI and will enable investors to benefit from the expanding energy sector, "as India transitions from a developing to a developed economy,” according to a company press release.

 

The schemes will allocate at least 80 per cent of its assets to equity instruments of companies in traditional and new energy sectors, including coal, crude oil, gas, nuclear, solar, wind, hydro, geothermal, and hydrogen.

 

“As India’s GDP is projected to grow by 1.9x times in the next five years, demand for energy is also poised to grow 1.7x times. Our Baroda BNP Paribas Energy Opportunities Fund is positioned to unlock profitable investment opportunities for investors from the developments in India’s Energy sector," said Suresh Soni, chief executive officer, Baroda BNP Paribas Asset Management India Pvt Ltd (AMC).

 

“Energy is a broad investment theme comprising almost a third of the stocks of the Nifty 500 index across a range of sectors and sub-sectors. Further, our research shows that not only does the Nifty Energy Total Return Index (Nifty Energy TRI) have a lower price-to-equity and price-to-book ratio compared to the Nifty 500 Total Return Index, but it also boasts higher dividend yield and faster earnings growth compared to the broader market,” said Sanjay Chawla, chief investment officer and equity and fund manager for the scheme.

 

Fund's strategy:

 

Investing in traditional energy chains such as exploration, production and distribution.

 

Emerging energy transitions, driven by government initiatives and private investment in renewable energy.

 

According to Baroda BNP Paribas AMC, the Nifty Energy TRI has outperformed the Nifty 500 TRI across 3, 5, 7, and 10-year periods ending December 31, 2024.

 

Government initiatives to boost energy sector

 

India's energy growth is supported by several government schemes, including:

 

Production linked incentive (PLI) for high-efficiency solar modules.

 

National solar mission rooftop scheme.

 

Viability gap funding for battery energy storage systems.

 

National green hydrogen mission.

 

The government plans to invite bids for 50 gigawatts of renewable energy capacity annually between FY24-FY28, which will quadruple solar power capacity and increase wind power capacity by 2.5 times by 2031-32.

 

Fund manager: Fund will be managed by Chawla and Sandeep Jain.

 

Minimum investment: The minimum investment amount is Rs 1,000 per application and in multiples of Re 1.

 

With energy being a long-term theme, the scheme is best suited for those looking to hold their investments for over three years.