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As India prepares itself for a massive push to become the third largest economy in the world, before the turn of the decade, there is one theme which is strongly intertwined with the domestic growth story and that is energy opportunities. The future of India and energy is intertwined across a range of levers, consisting of the country’s current energy needs, the fact that India’s future growth story is dependent on energy, the ongoing premiumisation to drive energy demand, the burgeoning energy demand across various upcoming segments and the fact that climate changes would increase the pressure on energy demand. Additionally, consistent government reforms for the energy sector as well as India’s ongoing renewable energy transition are also bolstering the theme.
The Upcoming Boom In Energy
Energy plays a crucial role in our daily lives, powering everything from household appliances to transportation and industrial growth. Modern living requires a variety of electrical appliances, such as refrigerators, air conditioners, and microwaves, leading to a significant increase in energy demand. Beyond households, energy fuels transportation, including cars, cargo engines, trains, and airplanes, and supports industries like healthcare, FMCG, textiles, and IT. It also powers communication networks, including telecommunication, broadcasting, and internet services.
The energy opportunities theme spans the oil and gas value chain (exploration, processing, refining) and the power value chain (generation, transmission, distribution). Further, renewable energy sources like solar and wind involve manufacturing, equipment provision, and infrastructure development, with ancillary companies offering services like engineering, procurement and construction (EPC), maintenance, power storage, and smart metering – all of which fall under the vast purview of the energy opportunities theme.
Recently, Union Minister Nitin Gadkari highlighted hydrogen as a key future fuel and predicted that vehicles in India would soon operate on green fuels. He pointed out the country's dependence on imported fossil fuels and mentioned that domestic farmers would eventually produce these green fuels. Gadkari also discussed the significant impact of rising ethanol demand on the agricultural economy, suggesting that this shift would transform farmers from providers of food to providers of energy.
He emphasised the importance of the ethanol industry for farmers, envisioning a future where motorcycles, e-rickshaws, auto-rickshaws, and cars run entirely on ethanol. Gadkari expressed his goal of achieving 100 percent ethanol-based vehicles in the coming year.
How And Where To Invest?
Investing in the energy sector offers lucrative opportunities in both sustainable and traditional energy sources, with two main avenues being direct equities and mutual funds. Direct equity investments involve buying shares of established companies in India’s energy market, offering significant return potential through expansion and green energy initiatives, though they come with higher risk and require active management. Alternatively, mutual funds pool money from multiple investors to create a diversified portfolio of energy stocks, offering professional management and reduced risk. Investors can choose between lump sum investments or systematic investment plans (SIPs) based on their risk tolerance, investment horizon, and financial goals.
Now that you know all about the potential inherent in the energy opportunities theme, you might consider if the sector is the right fit for your requirements.
