The mutual fund expert believes that a strategic allocation of 10-20% in the pharma and healthcare funds could benefit investors with a moderate to long term investment horizon because in the long term as healthcare demands continue to rise due to various factors, the sector may offer solid returns.
“In the long term, as healthcare demand continues to rise due to demographic shifts, lifestyle diseases, and advancements in medical technology, the sector may offer solid returns. A 10-20% strategic allocation in these funds could benefit investors with a moderate-to-long-term investment horizon,” said Abhishek Jain, Head of Research, Arihant Capital.
Pharma and healthcare sector based mutual funds have offered around upto 44% in 2024 so far. There were around 13 funds in the category which together gave an average return of around 37.20% in the mentioned time period.
Three schemes in the category gave over 40% return in this year so far. HDFC Pharma and Healthcare Fund, the topper in the category, gave 43.77% return in 2024 so far. ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund and LIC MF Healthcare Fund offered 42.49% and 40.85% returns respectively in the mentioned period.
Tata India Pharma & Healthcare Fund and Mirae Asset Healthcare Fund gave 35.71% and 35.66% returns respectively in the said period. Quant Healthcare Fund delivered 34.65% return, followed by Kotak Healthcare Fund which gave 34.04% return in the similar time period.
Also Read | These 4 index funds are open for subscription. Here’s a breakup
Aditya Birla SL Pharma & Healthcare Fund and Nippon India Pharma Fund offered 33.21% and 30.90% returns respectively in the said period.
Are you wondering what drove the strong performance of pharma and healthcare funds in 2024?
The expert attributes this performance to several factors. Firstly, as other sectors corrected, the healthcare sector remained resilient. Second, the sector has shown steady growth in the domestic market which is driven by stable pricing and robust demand.
“This impressive performance can be attributed to several factors. Firstly, while other sectors faced corrections and economic headwinds, the healthcare sector remained resilient. Slowdowns in manufacturing and challenges in the financial services sector prompted investors to seek refuge in defensive plays like healthcare, which tend to be less sensitive to broader economic cycles,” said Jain.
“Additionally, the Indian pharmaceutical sector has shown steady growth in the domestic market, driven by stable pricing and robust demand. Globally, Indian healthcare players have benefited from stable pricing in international markets, which has helped sustain earnings. Moreover, an increase in disease awareness and demand for healthcare services, especially in the hospital segment, has further fueled growth within the sector,” he added.
Also Read | Bajaj Finserv Consumption Fund, and 5 other MF NFOs to open for subscription this week
The pharma and healthcare funds are benchmarked against BSE Healthcare - TRI, Nifty Healthcare Index - TRI, and NIFTY PHARMA - TRI which went up by 40.51%, 36.61%, and 36.68% respectively in 2024 so far.
Out of 13 schemes in the category that have been around in the said period, only four funds have managed to beat their respective benchmarks and nine funds failed to beat their benchmarks.
Post seeing the current underperformance of pharma and healthcare funds, should one invest in these funds? What allocation should be considered?
According to the expert, the investors should proceed with caution given the current valuations and allocating 10-15% of one's portfolio to pharma and healthcare funds could be prudent, with further additions considered over time.
“While the pharma and healthcare sector shows promising long-term potential, investors should proceed cautiously given the current valuation. These funds have seen significant gains, and valuations may not be very comfortable at this point. However, a gradual approach is recommended if an investor is keen on entering this sector,” recommended Jain.
He also adds, “Allocating 10-15% of one's portfolio to pharma and healthcare funds could be prudent, with further additions considered over time. This phased allocation strategy, also known as "adding in tranches," allows investors to potentially benefit from market dips, reducing the risk of entering at high valuations.”
In the last one year, these schemes gave an average return of 58.49% with offering returns up to 65.26% in the same period. HDFC Pharma and Healthcare Fund topped the return chart and delivered 65.26% return in the last one year. LIC MF Healthcare Fund gave 62.38% return, followed by UTI Healthcare Fund which gave 59.27% return in the same time period.
Aditya Birla SL Pharma & Healthcare Fund and Nippon India Pharma Fund offered 53.34% and 51.11% returns respectively in the last one year.
Also Read | Best mutual fund SIP portfolios to invest in November 2024
After looking at the previous performance, are you wondering whether these funds will perform in similar fashion? What is the outlook for these funds?
“The outlook for the pharma and healthcare sector remains positive. The industry is expected to continue delivering stable growth, driven by ongoing demand for healthcare services, increasing healthcare awareness, and strong performance in both domestic and global markets. However, investors should monitor valuation levels and economic indicators that might impact the sector's defensive positioning,” said Jain.
Sector schemes, including pharma funds, are recommended only to aggressive investors who can take high risks and put up with volatility. Investors should also remember that these schemes can underperform for a long period.
We don’t recommend pharma funds to new or inexperienced investors. Investors with a large corpus can use these schemes to diversify their portfolio. However, such investors should invest only 5-10% of their total portfolio in sector schemes like pharma. Well informed investors can also make tactical investments.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and twitter handle.
“In the long term, as healthcare demand continues to rise due to demographic shifts, lifestyle diseases, and advancements in medical technology, the sector may offer solid returns. A 10-20% strategic allocation in these funds could benefit investors with a moderate-to-long-term investment horizon,” said Abhishek Jain, Head of Research, Arihant Capital.
Pharma and healthcare sector based mutual funds have offered around upto 44% in 2024 so far. There were around 13 funds in the category which together gave an average return of around 37.20% in the mentioned time period.
Three schemes in the category gave over 40% return in this year so far. HDFC Pharma and Healthcare Fund, the topper in the category, gave 43.77% return in 2024 so far. ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund and LIC MF Healthcare Fund offered 42.49% and 40.85% returns respectively in the mentioned period.
Tata India Pharma & Healthcare Fund and Mirae Asset Healthcare Fund gave 35.71% and 35.66% returns respectively in the said period. Quant Healthcare Fund delivered 34.65% return, followed by Kotak Healthcare Fund which gave 34.04% return in the similar time period.
Also Read | These 4 index funds are open for subscription. Here’s a breakup
Aditya Birla SL Pharma & Healthcare Fund and Nippon India Pharma Fund offered 33.21% and 30.90% returns respectively in the said period.
Are you wondering what drove the strong performance of pharma and healthcare funds in 2024?
The expert attributes this performance to several factors. Firstly, as other sectors corrected, the healthcare sector remained resilient. Second, the sector has shown steady growth in the domestic market which is driven by stable pricing and robust demand.
“This impressive performance can be attributed to several factors. Firstly, while other sectors faced corrections and economic headwinds, the healthcare sector remained resilient. Slowdowns in manufacturing and challenges in the financial services sector prompted investors to seek refuge in defensive plays like healthcare, which tend to be less sensitive to broader economic cycles,” said Jain.
“Additionally, the Indian pharmaceutical sector has shown steady growth in the domestic market, driven by stable pricing and robust demand. Globally, Indian healthcare players have benefited from stable pricing in international markets, which has helped sustain earnings. Moreover, an increase in disease awareness and demand for healthcare services, especially in the hospital segment, has further fueled growth within the sector,” he added.
Also Read | Bajaj Finserv Consumption Fund, and 5 other MF NFOs to open for subscription this week
The pharma and healthcare funds are benchmarked against BSE Healthcare - TRI, Nifty Healthcare Index - TRI, and NIFTY PHARMA - TRI which went up by 40.51%, 36.61%, and 36.68% respectively in 2024 so far.
Out of 13 schemes in the category that have been around in the said period, only four funds have managed to beat their respective benchmarks and nine funds failed to beat their benchmarks.
Post seeing the current underperformance of pharma and healthcare funds, should one invest in these funds? What allocation should be considered?
According to the expert, the investors should proceed with caution given the current valuations and allocating 10-15% of one's portfolio to pharma and healthcare funds could be prudent, with further additions considered over time.
“While the pharma and healthcare sector shows promising long-term potential, investors should proceed cautiously given the current valuation. These funds have seen significant gains, and valuations may not be very comfortable at this point. However, a gradual approach is recommended if an investor is keen on entering this sector,” recommended Jain.
He also adds, “Allocating 10-15% of one's portfolio to pharma and healthcare funds could be prudent, with further additions considered over time. This phased allocation strategy, also known as "adding in tranches," allows investors to potentially benefit from market dips, reducing the risk of entering at high valuations.”
In the last one year, these schemes gave an average return of 58.49% with offering returns up to 65.26% in the same period. HDFC Pharma and Healthcare Fund topped the return chart and delivered 65.26% return in the last one year. LIC MF Healthcare Fund gave 62.38% return, followed by UTI Healthcare Fund which gave 59.27% return in the same time period.
Aditya Birla SL Pharma & Healthcare Fund and Nippon India Pharma Fund offered 53.34% and 51.11% returns respectively in the last one year.
Also Read | Best mutual fund SIP portfolios to invest in November 2024
After looking at the previous performance, are you wondering whether these funds will perform in similar fashion? What is the outlook for these funds?
“The outlook for the pharma and healthcare sector remains positive. The industry is expected to continue delivering stable growth, driven by ongoing demand for healthcare services, increasing healthcare awareness, and strong performance in both domestic and global markets. However, investors should monitor valuation levels and economic indicators that might impact the sector's defensive positioning,” said Jain.
Sector schemes, including pharma funds, are recommended only to aggressive investors who can take high risks and put up with volatility. Investors should also remember that these schemes can underperform for a long period.
We don’t recommend pharma funds to new or inexperienced investors. Investors with a large corpus can use these schemes to diversify their portfolio. However, such investors should invest only 5-10% of their total portfolio in sector schemes like pharma. Well informed investors can also make tactical investments.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and twitter handle.
You may also like
Shooting in Karachi injures two Chinese nationals
"Atmosphere is in our favour": Sachin Pilot predicts MVA's victory in Maharashtra
K'taka: Shobha Karandlaje, BJP MLA Yatnal take part in strike over Waqf properties row
Toxic foam on Yamuna raises concerns as Chhath Puja begins in Delhi
UP: Rahul Gandhi inaugurates Shaheed Chowk, Degree College Chauraha in Raebareli
