Mutual Funds

DSP BlackRock World Energy Fund: Invest

Aarati Krishnan | Updated on September 15, 2012


Do you believe that petrol and diesel prices will only head up over the long term? Or that the world will increasingly suffer from shortage of fuel? As an Indian investor, there are not too many ways in which you can actually gain from this trend.

Investing in oil stocks such as ONGC or BPCL simply doesn’t help because profits for these companies seldom move in step with global oil prices.

But DSP BlackRock World Energy Fund, a fund which redirects your money into two BlackRock funds that invest in global energy stocks, is a good option for those keen on this theme.

By mandate, the DSP BR World Energy Fund allocates 50-100 per cent of its portfolio to the BlackRock World Energy Fund and up to 30 per cent in BlackRock’s New Energy Fund.

The fund’s top holdings are in stocks such as Exxon Mobil, Chevron Corp, Royal Dutch Shell, Anadarko Petroleum, Schlumberger and Halliburton. Global oil prices, after bottoming out in June have since risen, on new tensions in West Asia, disruptions to Iranian production and the European bond buyback plan.

Oil stocks have not fully tracked this price increase. They are also available at multi-year low valuations, with price earnings multiples in the 8-12 times range.

Growing profits and rising dividend payouts also make these stocks good dividend yield plays, limiting downside risk for investors in them.

The Rupee factor

The DSP BR World Energy Fund’s returns also get bolstered by any depreciation of the rupee against the dollar.

This is in fact why, the World Energy Fund is down marginally both for one year and on a year to date basis in dollar terms. But the DSP BlackRock World Energy Fund is up 18 and 4 per cent, respectively, for these two time periods. This factor, of course can work against the fund if the Rupee appreciates against the dollar.

Given the volatility that oil prices and stocks are subject to, this fund should make up a limited portion of your portfolio, say, not more than 5 per cent.


Published on September 15, 2012

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