Natural resources are considered to be the backbone of any economy. In India, the economic value of natural resources like oil, iron, iron ore, coal is high. In recent years there has been a rise in commodities like base metals, gold, oil and natural gas. India has sufficient amounts of basic commodities, within India and globally too. This situation has led to severe escalation in the prices of these goods. Also, there is a strong possibility of further price rise in the near future. Hence, the investors who invest in natural resources funds can receive the benefits accordingly.

These natural resource funds are not as concentrated as sector funds in terms of exposure to a specific sector. Hence, even if one or two sectors in the natural resources theme start to slow down, the fund manager can yet still out perform by increasing exposure to other sectors in the theme. There are many major natural resources and investment in these funds which is found to be attractive.

One of the natural resources is oils and gas. Demand for oil and gas is expected to grow rapidly. Due to rapid infrastructure development and growing industrialization movement, there is an increasing energy need in countries like India, China and Brazil too. Petroproducts is expected to grow at about 209.2 million metric tones by 2011. At present it is 164.7 million tones. There is no possibility of discovering any big reserve of oil and gas, in the future. In such a situation, the prices of these resources are likely to rise higher. Companies who are engaged in the discovery, refining and distribution of oil and gas are going to benefit significantly.

In the past, it was the western nations with their small populations who were found to be reckless consumers of natural resources. But now Asia has arrived on the scene. India and China have experienced economic booms and so there is a sharp rise in per capita income which brought forward a desire for better life styles among 2.5 billion people. Hence, now there is a great demand for natural resources and particularly the demand for energy is more.

Coal being a non-renewable resource, is the biggest source of energy in India. It is used mainly to generate thermal power. By 2012, there will be a great demand for coal which will increase to 800 million metric tones per year. Due to the increasing gap between the supply and demand for power, there is expectation of rapid growth with the demand for coal.

In India, Mutual funds cannot invest directly in commodities. Hence, investors take an indirect exposure to industrial commodities by investing in natural resources funds which invest in both, domestic and global companies. These companies are involved in commodities like coal, aluminum, copper, zinc etc.

Speculators involved by large and unregulated hedge funds have spotted the trend with regard to the great demand for energy and have thus fueled a sharp speculative rise in the prices of oil, commodities and natural resources. Also, due to the threat of recession in the US, there is a world economic downturn and soaring prices of natural resources. In, India the prices of gold, oil and natural resources are already rising since recent years. One can profit from this situation by investing in natural resource funds. The natural resource funds can be considered as equity oriented mutual funds which invest in companies with business focused on oil, coal, iron ore, agricultural products, forest products, precious metals and renewable and non renewable energy.