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Energy and electrification are not just big themes in India – they now are global decadal themes. Some of the smartest global fund managers are focusing on this theme (including Naren’s gurus Howard Marks and Warren Buffet) – which is now available to harness in India through the new ICICI Prudential Energy Opportunities Fund.
Market valuations are not cheap and the fund house’s call on asset allocation and hybrids remains undiminished. For those who desire an equity allocation now, this NFO provides an opportunity to invest into an equity portfolio that will be built up fresh, with a cautious mindset, into a theme that has a long runway ahead.
Power generation and transmission businesses have significant regulatory clarity until 2029 and the delta here will continue to come from volume growth as India gears up to serve the burgeoning demand for electricity.
A big upside for regulated businesses in power and energy spaces is that while RoE guidelines have been spelt out till 2029, falling interest rates in the coming years will drive market valuations up significantly. A regulatorily capped RoE of 16% in an 8% interest rate environment will be valued far less than the same RoE in a 5% interest rate environment.
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