Powering Tomorrow: Best Indian Energy Stocks12-min read

The Best Energy Stocks in India: An Overview

Energy stocks have been gaining significant attention and popularity among retail investors in India in recent years. With increasing accessibility to these stocks and growing interest in sustainable solutions, investors are flocking towards companies like Reliance Industries, ONGC, and Adani Green Energy. The market growth rate for energy is expected to be around 10% from 2022 to 2027, indicating a promising future for the sector.

Investing in energy stocks is particularly attractive for several reasons. Firstly, it is considered a future-proof stock due to the ever-increasing energy demands of a rising global population. Innovators are making significant efforts to bring renewable energy solutions to the forefront, presenting investors with the best energy stocks in India. This allows investors to participate in a growth sector with significant potential for long-term gains. Secondly, the market for energy stocks is thriving, with better and more accessible apps like Admiral Markets and Libertex emerging. These applications provide people with access to stocks they may not otherwise have access to, making it easier for investors to search for the best stocks to buy. The removal of any bottlenecks in the buying process helps to make investing in energy stocks more accessible and straightforward for investors.

Despite the benefits, it is important to recognise that not all energy stocks are created equal. Some companies have a higher entry barrier, and others have a higher risk associated with them. Therefore, it is essential to make informed decisions when investing in the right stock. This article aims to help investors find the best energy stocks in India, provide information on the investment process, assess the risks involved, and offer guidance on how to overcome potential obstacles.

The energy sector is vast, with a broad range of companies to choose from. Therefore, investors must conduct thorough research and analysis of various options before making any investment decisions. This involves evaluating the performance of different stocks, identifying trends, and assessing potential risks. In doing so, investors can identify the best energy stocks for their portfolios. Another critical factor to consider when investing in energy stocks is risk. As with all investments, there is a level of risk associated with energy stocks. However, with proper due diligence and analysis, investors can mitigate potential risks and make informed decisions. This article will provide information on the risks associated with investing in energy stocks, how to assess them, and ways to overcome potential obstacles.

In conclusion, investing in energy stocks can be an attractive option for investors seeking growth opportunities in a thriving sector. However, it is essential to conduct thorough research and analysis, assess potential risks, and make informed decisions when choosing the right stock. With proper due diligence and the right guidance, investors can find the best energy stocks in India and make the most out of their investments.

In This Guide:

1. Best Brokers for Investing in Indian Energy Stocks
2. Why Invest in Indian Energy Stocks
3. How to Choose the Best Indian Energy Stocks
4. Top Indian Energy Stocks for Retail Investors
5. Tutorial: How to Invest in Indian Energy Stocks
6. Risks and Challenges of Investing in Indian Energy Stocks
7. Green Gold: Renewable Energy in India
8. Conclusion

Best Brokers for Investing in Indian Energy Stocks in November 2024

Investing in the energy sector offers exposure to one of the most dynamic and essential industries in India. However, selecting the right broker is critical to navigating this market effectively. The following brokers provide excellent platforms, tools, and services tailored for investing in Indian energy stocks:

AvaTrade

Overview:
AvaTrade is a globally trusted broker known for its extensive asset offerings, including Indian and international energy stocks. The platform is well-suited for both novice and experienced traders looking to diversify their portfolio with energy investments.

Key Features:

• Access to energy stocks, ETFs, and commodities.
• Advanced trading platforms, including MetaTrader 4 and 5.
• Comprehensive educational resources like webinars and tutorials.

Pros:

• Zero Commission on Stock CFDs: Cost-effective for frequent traders.
• Robust Risk Management Tools: Includes stop-loss and take-profit features.
• 24/7 Customer Support: Available via chat, email, and phone.

Cons:

• Limited direct exposure to specific regional energy markets in India.
• Platform customization may require a learning curve for new users.

Zerodha

Overview:
As India’s top discount broker, Zerodha offers cost-effective access to Indian energy stocks through its intuitive Kite platform. Ideal for domestic investors seeking a simple and efficient trading experience.

Key Features:

• Low brokerage fees, particularly for equity delivery trades.
• Seamless integration with other Zerodha services like Coin for mutual funds.
• Advanced charting tools and data analytics.

Pros:

• Low Costs: Highly competitive fees make it ideal for retail investors.
• Ease of Use: Beginner-friendly interface.
• Regulated by SEBI: Ensures operational transparency and investor protection.

Cons:

• Limited international stock access.
• No personalised advisory services.

ICICI Direct

Overview:
ICICI Direct is a full-service broker that provides access to both Indian and global energy markets. Known for its strong research capabilities, ICICI Direct caters to investors who value in-depth insights and comprehensive services.

Key Features:

• Extensive research reports on energy sector companies.
• Access to IPOs, mutual funds, and insurance products in addition to stocks.
• Seamless integration with ICICI Bank for easy fund transfers.

Pros:

• Personalised Advisory Services: Tailored investment guidance.
• Wide Range of Investment Options: Beyond just energy stocks.
• User-Friendly Platform: Suitable for both beginners and seasoned investors.

Cons:

• High Fees: Brokerage rates can be steep compared to discount brokers.
• Complex Fee Structure: May confuse new investors.

Why Invest in Indian Energy Stocks

India’s growing population has led to an increase in energy requirements, which has created a surge in energy demand. Although renewable energy sources have gained traction over the last nine years, fossil fuels and other energy stocks still have a dominant position in the market.

India’s vast energy reserves play a significant role in this scenario. As the third-largest oil reserve holder globally, and with coal deposits that could last over a century, buying pressure for these resources will continue to increase over time. However, as these non-renewable resources start to deplete in the coming years, their prices will inevitably rise.

On the other hand, the demand for renewable energy is also growing. While many people may not be entirely aware of this trend, it presents an interesting buying opportunity. Investing in green energy options, which are now considered some of the best energy stocks in India, could provide early-mover advantages as the lack of non-renewable resources increases the demand for these alternatives.

Considering the current situation, it appears that investing in a balanced portfolio of both renewable and non-renewable energy stocks could provide potential benefits for investors. It is important to note that the energy sector is highly volatile and can be affected by various factors such as government policies, global events, and technological advancements. Therefore, it is crucial to conduct thorough research and analysis before making any investment decisions.

Oil and Gas Stocks

India’s future GDP growth is expected to be largely driven by the Oil and Gas industry, which is a crucial factor for the country’s economic and financial growth. Despite this, many companies in the oil sector have provided only average returns in the past, which can make investors hesitant to invest in this industry.

However, it’s worth noting that the oil and gas industry in India is still in its early stages of development and has plenty of room to grow. With India being the third-largest oil reserve in the world and coal deposits that will last for over a century, the demand for oil and gas in India is expected to continue to rise in the foreseeable future.

Moreover, India has made significant efforts to attract foreign investment in the oil and gas sector by providing incentives and simplifying regulations. This has led to a rise in exploration and production activities, with many new companies entering the market. This trend is expected to continue, which can provide investors with ample opportunities to invest in this sector. Now, Indian retail investors are spiking the commodity’s popularity by rushing to buy oil online from trusted brokers.

It’s also important to note that the oil and gas industry is subject to fluctuations in global oil prices, which can impact the profitability of companies operating in this sector. Therefore, investors should carefully evaluate their investment options and consider diversifying their portfolio to mitigate these risks.

Renewable Energy Stocks

Renewable energy stocks have witnessed a significant surge in interest in the past decade. This is largely due to the Indian government’s push to make renewable energy a more relevant energy source. India’s adoption of solar energy has experienced a remarkable increase, while the government is also considering tapping into wind energy sources. Furthermore, hydropower is already a popular method for providing energy in the country, and biomass accounts for 70% of India’s energy market.

The Ministry of New and Renewable Energy and the Ministry of Power have adopted a progressive regulatory stance, which is expected to result in further progress in terms of prices over time. This regulatory push towards renewable energy is an important development that investors should consider when looking for investment opportunities in India’s energy sector.

How to Choose the Best Indian Energy Stocks

Even though energy stocks have seen an uptick in the past, one must not lose sight of the volatility of the current market. Here are some points to help you choose the best energy stocks in India to buy.

Assess the Company’s Financial Performance

When considering buying oil stocks in India, it is important to choose between upstream, downstream, and midstream companies. You can assess the performance of these companies by reviewing their financial details, which can be found on the Ministry of Corporate Affairs’ website. Additionally, since most energy companies are publicly traded, you can also download their financial statements from their official site.

Two key metrics that you should consider when reviewing these financial statements are the price-to-earnings ratio and earnings-per-share ratio:

·       The price-to-earnings ratio can inform you whether a company’s stock is overvalued or undervalued. An overvalued stock may have a low shelf life and can experience rapid and volatile decreases. On the other hand, an undervalued stock can increase linearly or parabolically.

·       Earnings-per-share is another important metric to consider, as it can tell you how profitable a company has been in the past.

This information can be helpful in determining the company’s potential future growth and profitability. By taking the time to review financial statements and assess these key metrics, you can make more informed decisions when buying oil stocks in India.

Assess the industry trends

In times of market volatility, it is important to keep a close eye on industry trends. With inflation on the rise and the global market having an uncertain impact on the Indian energy industry, staying informed about an oil company’s current situation is crucial. Even seemingly small details can have a significant impact on the company’s performance, making it vital to stay up-to-date with all relevant information. This includes monitoring news related to the company, its competitors, and the industry as a whole, as well as analyzing financial statements and stock performance. By doing so, you can make informed decisions about buying and selling energy stocks in India.

Market Conditions

Use price charts and technical indicators to assess market conditions. Sites like Tradingview can help in this regard. They will allow you to gain a bird’s-eye view of the broader conditions of the market before you invest.

Top Indian Energy Stocks for Retail Investors

Here is the list of the best energy stocks in India this year.

1. Reliance Industries
2. ONGC
3. Adani Green

Reliance Industries

This top energy company in India operates in the Oil to Capital sector, but its stock price has been volatile in the past year, with a 10.71% decrease according to charts. Its current P/E ratio is 23.58, which indicates that the company’s stock may be slightly overvalued. Additionally, the Div Yield of 0.36% suggests that the company may not be an ideal choice for income-seeking investors. It’s important to keep track of such metrics when investing in energy stocks in order to make informed decisions.

ONGC

ONGC’s performance last year wasn’t strong, as its stock price went as low as INR 120 in August 2022 before seeing a rebound. As of now, the year-to-date increase is only 1.63%. However, ONGC’s P/E ratio is currently at a low 4.55, which may be an indication that the stock is undervalued. In addition, its dividend yield is at a high 8.62%, which could be attractive to investors seeking income.

Adani Green

Adani, a prominent Indian conglomerate, has been under scrutiny lately for allegations of financial impropriety, causing its stock price to take a hit. However, Adani Green, the group’s renewable energy arm, has shown some resilience and recently experienced a 29% increase in its monthly stock price. It is worth keeping an eye on the developments of the ongoing investigation into Adani’s financial practices, as it may have further implications for the company’s overall performance.

Tutorial: How to Invest in Indian Energy Stocks 

Investing in Indian energy stocks through AvaTrade is a streamlined process, offering access to a wide range of assets and trading tools. Below is a step-by-step guide to help you get started:

Step 1: Open an Account on AvaTrade

Begin by visiting the AvaTrade website and clicking on the “Register” or “Sign Up” button. Complete the registration form by providing your:

• Name
• Email Address
• Phone Number

Once submitted, AvaTrade will send a verification email. Follow the link to confirm your account and proceed with the Know Your Customer (KYC) process by uploading identification documents such as your Aadhaar or PAN card.

Step 2: Access the Trading Dashboard

After completing the KYC process, log in to your account and navigate to the trading dashboard. This is your central hub for managing trades, deposits, and accessing trading tools.

Step 3: Explore the “Market Watch” Section

On the dashboard, locate the “Market Watch” or “Symbols” section. This feature provides a comprehensive list of available financial instruments, including Indian energy stocks.

• Search for your desired energy stocks or ETFs by typing the stock symbol or company name.

Step 4: Review the Price Chart

Once you select a stock, AvaTrade will display a detailed price chart. Use this chart to:

• Analyse Historical Data: Understand past performance.
• Identify Trends: Spot bullish or bearish movements.
• Use Indicators: Apply technical analysis tools to refine your strategy.

Step 5: Initiate a Trade

After reviewing the chart, navigate to the top of the chart panel where you’ll find Buy and Sell buttons. Click on the Buy or Sell button to access the order panel.

Step 6: Choose Your Order Type

AvaTrade offers various order types to suit different trading strategies:

• Market Order: Execute the trade at the current market price.
• Limit Order: Set a specific price to buy or sell.
• Stop Order: Automatically trigger a trade once a specified price level is reached.

Once you’ve selected the order type, click “Market Execution” to finalise your trade.

Step 7: Monitor and Manage Your Investments

After executing your order, you can monitor the stock’s performance through the Portfolio section. AvaTrade provides real-time updates, allowing you to adjust your strategy as needed.

Risks and Challenges of Investing in Indian Energy Stocks

Here are the risks associated with investing in even the best energy stocks in India.

Regulatory Risk

Regulations play a crucial role in the energy industry in India, as changes in policies and regulations can significantly affect the value of energy stocks. It’s important for investors to keep a close eye on the regulatory environment and how energy is perceived in the country. Changes in regulations could lead to a boost or dip in the value of a particular stock. Therefore, investors must stay informed about regulatory changes and their potential impact on energy stocks before making any investment decisions. Being knowledgeable about the regulatory aspect of the energy sector is critical to make informed investment decisions and minimize risk.

Geopolitical Risk

Geopolitical risks are a significant factor to consider when investing in energy stocks, especially in India where energy regulations can vary across different states. Additionally, it is essential to keep an eye on the global market and its impact on the Indian energy industry. Changes in global energy demand and supply can influence the price of energy stocks, making it crucial to stay up-to-date on the latest market trends. By keeping a watchful eye on both geopolitical risks and global market conditions, investors can make informed decisions when buying energy stocks in India.

Market Volatility

Rising inflation and concerns related to war have made the market highly volatile, with expectations for linear increases minimal at all times. To deal with these issues, it is important to have realistic expectations and never invest in just one asset; diversify your investments to mitigate risk.

Maximizing your portfolio can help offset losses, and creating a long-term investment plan for energy stocks can help you ride out market volatility. Keep a close eye on geopolitical risks and the global market, as these factors can have a significant impact on energy stocks.

Green Gold: Renewable Energy in India

Investindia, which is the national investment promotion and facilitation agency, has reported that India has achieved a remarkable 396% increase in its renewable energy capacity in recent years. This is a significant achievement for a country that has traditionally relied heavily on non-renewable sources of energy. According to Investindia, 42.5% of India’s energy is now being generated through hydropower, and the country saw a 9.83% increase in the number of renewable energy additions.

India also ranks third in the world in terms of the Renewable Energy Attractive Index, which is an indicator of the potential for investment in the renewable energy sector. Given that India is the third-largest energy-consuming country globally, the potential for growth in the green energy sector is enormous. In fact, according to MordorIntelligence, India’s renewable energy industry is projected to witness a CAGR of more than 10% by 2028.

Currently, companies like Adani Green Energy are leading the charge in this growth, but many startups are also expected to enter the market, which could lead to a more competitive market and potentially bolster the prices of green energy stocks in the near future. Overall, India’s commitment to renewable energy presents a significant opportunity for investors looking to capitalize on the growth potential in this sector.

You can read our in-depth coverage and analysis of Indian renewable energy stocks, providing you with the information you need to make the most lucrative investment decisions. Stay ahead of the curve and secure a better future for your children, whilst also capitalising on the way of the future by investing in the best renewable energy stocks in India.

Conclusion

India’s energy market is rapidly growing, with green energy stocks taking a major share of the growth. We have reviewed some of these stocks and provided insight into their performance. Here are the key takeaways to keep in mind:

1.     The best energy stock brokerage firms are Admiral Markets and Libertex.

2.     Investors should always assess market conditions, the company’s financial performance, and brand power before investing.

3.     Stock investments carry risks that can be mitigated by setting realistic expectations and diversifying investments.

If you want to take part in India’s future and generate profits from it, invest in energy stocks. They have great long-term potential that will only grow when scarcity curbs supply and builds buying pressure.