One of my relatives asked me yesterday whether he should invest in a new State Bank of India (SBI) scheme. I asked him the name of the scheme. He shared a screenshot of a document sent to him via WhatsApp with the name of the scheme – SBI Energy Opportunities Fund.
I told him it is not a State Bank scheme. It is a mutual fund scheme by SBI Mutual Fund, which is not State Bank. Surprised, my relative said a local agent told him it is a State Bank scheme and the price per “share” is Rs 10!
It took me some time to help him understand it is not “share” price but the Net Asset Value (NAV) of one unit of the fund. That you don’t buy direct shares by investing via mutual funds. And more importantly, mutual fund units should not be confused with shares.
I am hoping my relative has understood what I was trying to convey. But this is not a one-off incident.
Misselling of mutual funds is rampant, especially in small towns. When a new fund offer is announced, many agents sell it as if it is a new IPO. Sometimes, even agents don’t know exactly what they are selling. If it’s written SBI, then it must be a State Bank scheme – this is what some of them think and sell to customers.
Having helped my relative, I thought it would good to compile key points about this new SBI Mutual Fund Scheme to help readers. Here it is.
New Fund Offer Details
SBI Energy Opportunities Fund is a New Fund Offer (NFO) from SBI Mutual Fund. The NFO opened for subscription on February 6, 2024. It will remain open till February 20, 2024.
Readers should now that it is a Sectoral/Thematic mutual fund which carries very high risk. Fund managers of SBI Energy Opportunities Fund will try to help investors benefit from growth in traditional and new energy sectors and allied business activities. As such , this scheme will invest in companies operating in the energy sector. The benchmark index for this fund is Nifty Energy TRI.
According to Value Research, Nifty Energy TRI has given around 71% returns in last 12 months. Some of the top stocks in this index are PSUs such as NTPC, Power Grid, ONGC and Coal India. These PSU stocks have had a great run in the market in last 12 months with 70-105% returns.
The fund is expected to have a concentrated portfolio of 20-25 stocks. It may also explore overseas companies.
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Fund Manager
SBI Energy Opportunities Fund will be managed by Raj Gandhi and Pradeep Kesavan. Raj has been with SBI Funds Management since October 2017. As per Value Research, Raj has till now focused on tracking commodities and related sectors such as energy and metals. This is the first time that he will be managing a fund.
Pradeep has been with SBI Funds Management since July 2021 and is currently managing SBI International Access-US Equity FoF fund.
Tax on SBI Energy Opportunities Fund
The returns from investing in SBI Energy Opportunities Fund will be taxed in the same way as other equity funds. If you sell your units after one year then gains above Rs 1 lakh will be taxed at 10%. (Note: There is no tax on gains up to Rs 1 lakh in a financial year). However, if you sell your units within one year then 15% tax will be levied.
Risks
Investors should know that thematic or sectoral funds like SBI Energy Opportunities Fund can be extremely risky and volatile.
Further, investing in an NFO is itself a very risky exercise. NFO subscribers may be attracted by the lure of getting mutual fund units at an NAV of Rs 10. However, it is hard to assess a new fund. More so because there is no track record of an NFO.
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As such funds focuses only on particular sectors, their success depends on how such sectors perform.
However, you may invest in this scheme if you are convinced that energy sector is going to do well in future and you want to ride the energy theme. In case you are not convinced then you may benefit more by investing in well-diversified equity funds.
The 1% News recommends consulting a SEBI-registered investment advisor before investing in any mutual fund or NFO.
You may join The 1% Club here to learn more about mutual funds and how to create an ideal portfolio for early retirement.
Disclaimer: The above content is for informational purposes only. Please consult your financial advisor before investing.
