As the equity markets in India see a boom, the interest of retail investors towards capital markets has increased substantially. However, all investors do not possess expertise in navigating the markets and do not have the time to monitor the share prices. Thus, a significant number of them opt for investing in mutual funds to have experienced fund managers handle their investments.
Some people may choose to invest in index funds which are known to give healthy returns with a low-to-moderate amount of risk. Meanwhile, others may choose to invest their money in thematic funds, based on what sector or themes they think will see high growth and provide high returns.
One such theme that investors look into is the power sector, where retail investors look for mutual funds that put funds in power sector stocks. In this blog, we will explore why people invest in power sector stocks or mutual funds, what are the major benefits of investing in the power sector, how to spot these funds and what are the top power sector mutual funds that market participants can consider investing in.
Why invest in power sector mutual funds?
The country’s energy sector has seen noteworthy progress over the last 10 years with total installed power capacity climbing to 476 GW, as of June 2025, as compared to 305 GW in 2015-16. Power shortages have dropped to just 0.1% in 2024-25 as opposed to 4.2% in 2013-14 and 100% village electrification was achieved by April 2018, connecting more than 2.8 crore households to the power grid. The per capita electricity consumption in India rose by 45.8% to 1,396 kWh in 2023-24, indicative of improved access to electricity across the country, as per data from India’s Energy Landscape, Powering Growth with Sustainable Energy, posted on Press Information Bureau (PIB).
Furthermore, the nation’s renewable energy sector has shown remarkable growth, with non-fossil fuel sources contributing 235.7 GW (49%) of the total power generation capacity, inclusive of 226.9 GW of renewable energy and 8.8 GW nuclear power. Solar energy capacity has increased to 110.9 GW in 2025, 39 times more than 2.82 GM in 2014. Wind capacity has doubled to 51.3 GW. India now holds the 4th rank on the global scale for renewable energy installed capacity and has also launched flagship programs such as PM-Surya Ghar (targeting 1 crore households with rooftop solar), PM-KUSUM scheme for farmers, and the National Green Hydrogen Mission with a ₹19,744 crore outlay to position India as a global green hydrogen leader by 2030.
Moreover, the nation has also strengthened its traditional energy sectors while promoting sustainability. Coal production rose by 72% from 609.18 million tonnes in 2014-15 to 1,047.68 million tonnes in 2024-25, while reducing import dependency from 26% to about 19.60%. The oil and gas sector has expanded significantly with LPG connections increasing from 14.51 crores to 32.97 crores, CNG stations becoming tenfold to 7,720, and ethanol blending surging from 1.53% to 18.5%. Nuclear energy has also boomed with a 71% increase in installed capacity to 8,780 MW, achieving an 87% plant load factor in FY 2024-25.
These factors make the power sector an important part of the country’s growth and thus may attract more and more investments, prompting people to look for mutual funds focused on this theme.
Benefits and risks of sectoral mutual funds
Sectoral mutual funds have one major advantage over other funds which is that they invest the entire amount in the same sector. This is beneficial for those investors who have a lot of faith in just one sector and are sure that it will give high returns over time. In this scenario, even if one company from the sector is not performing well, the growth in the other companies of the same sector will cover up for any losses made.
However, investors must also consider the fact that the landscape is not always rosy and that the sector may see a downturn, especially if it is a sector that is sensitive to macroeconomics, changing government policies and other such factors. Such situations may lead to a drop in the share price of all stocks of that sector, thus eroding any gains. Lack of diversification may work against the best interests of the investors in this case.
How to choose the right fund?
Choosing the right fund involves several steps and analyses. The first step would be to decide your goals for investment and the duration you can remain invested to achieve those goals. The next important step would be to determine your risk appetite.
Once your goals and risk levels are clear, it’s time to focus on the fund specifics. Compare past performance of the fund, expense ratios (lower costs are preferred as they won’t eat into the net profit), total assets under management, and the fund manager’s track record. Additionally, investors can also check out metrics like portfolio composition and consistency in achieving benchmark returns
Top 5 power sector mutual funds to watch in 2025
Lets take a look at the top 5 power sector mutual funds in 2025.
ICICI Prudential Energy Opportunities Fund – Regular (Growth)
This mutual fund scheme is equity-oriented and targets companies that operate in traditional as well as new (renewable and sustainable) energy sources. The companies cover sectors such as oil & gas, power generation, distribution, and infrastructure. This is a high risk fund, suitable for investors that are seeking exposure to power sector stocks.
Asset Management Company (AMC): ICICI Prudential Mutual Fund
Assets Under Management (AUM): Approximately ₹10,359 crores (as of July 18, 2025)
Past Returns: 1-year return of 4.99%; the scheme was launched in July 2024, so long-term historical data is not yet available.
Fund Managers: Sankaran Naren and Nitya Mishra
Net Asset Value (NAV): 10.4
Beta ratio: 0.7%
Expense Ratio: 1.72% (for Regular Plan)
SBI Energy Opportunities Fund – Regular (Growth)
This fund is structured to focus majorly on domestic as well as international power sector stocks and related companies. The fund invests in companies that operate in electricity generation, renewables, transmission, distribution, and energy technology. The fund aims to provide investors potential returns that align with India’s evolving power and energy landscape.
Asset Management Company (AMC): SBI Mutual Fund
Assets Under Management (AUM): Approximately ₹10,461 crores (as of July 18, 2025)
Past Returns: This fund is new on the market; therefore, extensive historical performance data is not yet available. Initial investor updates should be reviewed for emerging performance trends.
Fund Managers: Raj Gandhi and Pradeep Kesavan
Net Asset Value (NAV): 10.9
Beta ratio: 1%
Expense Ratio: 1.77% (for Regular Plan)
Nippon India Power & Infra Fund (Growth)
This fund is positioned to benefit from the nation’s continued infrastructural investment and the booming power sector. It allocates assets in companies across power generation, transmission, engineering, and capital goods. The portfolio also includes emerging leaders in infrastructure sub-segments.
Asset Management Company (AMC): Nippon India Mutual Fund
Assets Under Management (AUM): Approximately ₹7,620 crores (as of July 18, 2025)
Past Returns: 3 to 5-year CAGR returns have ranged between 35% and 45%, though returns have been -7.3% in the past year.
Fund Managers: Rahul Modi and Kinjal Desai
Net Asset Value (NAV): 348.8
Beta ratio: 1.1%
Expense Ratio: 0.95% (for Regular Plan)
DSP Natural Resources & New Energy Fund – Regular (Growth)
As a sectoral/thematic offering, this scheme invests in companies engaged in natural resources (including metals, mining, and oil & gas) and newer energy domains (renewables, battery technology, etc.). The portfolio is designed for long-term capital appreciation, particularly for those seeking diversified exposure within resource-driven and energy transition themes.
Asset Management Company (AMC): DSP Mutual Fund
Assets Under Management (AUM): Approximately ₹1,316 crores (as of July 18, 2025)
Past Returns: 3 to 5-year CAGR returns have ranged between 23% and 27%, though returns have been -5.3% in the past year.
Fund Manager: Rohit Singhania
Net Asset Value (NAV): 90.4
Beta ratio: 0.7%
Expense Ratio: 2.09% (for Regular Plan)
Tata Resources & Energy Fund – Regular (Growth)
This scheme primarily allocates assets to Indian companies in the metals, energy, and associated infrastructure themes, with a direct emphasis on the power sector and energy value chains. It aims to deliver strong returns over multiple business cycles, capitalising on long-term demand for domestic energy resources and utility stocks.
Asset Management Company (AMC): Tata Mutual Fund
Assets Under Management (AUM): Approximately ₹1,172 crores (as of July 18, 2025)
Past Returns: 3 to 5-year CAGR returns have ranged between 22% and 25%, though returns have been 1.8% in the past year.
Fund Manager: Satish Chandra Mishra
Net Asset Value (NAV): 46.2
Beta ratio: 0.8%
Expense Ratio: 2.11% (for Regular Plan)
Who should invest in power sector mutual funds?
Investors that are considering power sector mutual funds—such as those focusing on power sector stocks, top power sector stocks mutual funds, or energy-themed portfolios—should carefully assess whether these funds align with their investment goals and preferences. Such sectoral funds are particularly suited to individuals with a higher risk appetite, as they expose portfolios to performance trends that are specific to this sector, governmental policy changes, and market cycles of the power and energy sector. Volatility can be heightened, especially in the short term, making these funds less suitable for those with low risk tolerance or a need for liquidity within a year or two. A long-term investment horizon—typically five years or more—is generally advised to help weather sectoral fluctuations and realise the potential for superior returns.
Additionally, these funds may be preferred by investors that are confident in the continued expansion of India’s energy and infrastructure sectors, and who wish their portfolios to reflect targeted bets on the nation’s power sector growth. However, exposure to any sectoral or thematic schemes should usually be limited to 10-15% of one’s overall equity allocation, ensuring that core diversification is maintained and that no single sector disproportionately impacts overall wealth. Careful portfolio review, consideration of one’s broader asset allocation, and consultation with a qualified financial adviser are strongly recommended before investing in power sector mutual funds.
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