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Investors who bet their money on funds focussed on the energy and natural resources sectors have reason to be glum.
Over the last one- and three-year periods, all four funds in this category delivered negative annual returns.
Three of these funds managed positive returns over the five-year period — from the market lows of early 2009.
But here, too, they just about kept pace with the benchmarks (BSE Metal, BSE Oil or BSE Power). But given that the benchmarks themselves lagged the broader market, the performance of these funds is nothing to write home about. The energy and natural resources sectors have been in the market doghouse for the last few years. The disenchantment is understandable, given the concerns that have plagued companies in these sectors.
Segment woes The litany is long — gas output drop (Reliance Industries), subsidy burden (ONGC, Oil India, HPCL and Indian Oil), onerous fuel supply agreements (Coal India), pricing restrictions (NMDC), and cost escalations (Tata Power).
In short, it’s been a rough ride for companies in the energy and natural resources space. For instance, Reliance Industries, a top holding in most energy funds, is down about 7 and 11 per cent over the one- and three-year periods, and is up about 26 per cent over a five-year period. The Sensex gained 2, 12 and 120 per cent over the one-year, three-year and five-year periods, respectively.
Other major holdings such as Oil India, Coal India, NMDC and Tata Power have also lagged across time periods. The BSE Metal, Oil and Power benchmarks trailed the Sensex by between 5 and 24 percentage points.
Fund-wise In this background, DSP Blackrock Natural Resources and New Energy did better than the other funds in the category, and also managed to beat its benchmark BSE Metal index over one-,three-, and five-year timeframes.
This was aided by the fund’s investments in agri-based stocks such as Bayer CropScience and Kaveri Seed Company, which gained handsomely. Exiting stocks such as Shiv-Vani Oil & Gas Exploration, which lost more than 90 per cent of its value, stood the fund in good stead.
On the other end of the spectrum is Escorts Power & Energy Fund, which has been the worst performer, delivering negative annual returns across time periods. Investments such as Bharat Bijlee and Gujarat State Petronet proved a drag, more than offseting gains from stocks such as Havells India and CESC.
Given the constraints in the energy and natural resource sectors, only a select few stocks may be able to deliver good returns.
Diversified funds with such stocks may be a better option for investors seeking exposure to the energy space.
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