India is the second-most populous nation in the world, making it essential to have a robust healthcare system. Healthcare companies have a pivotal role in doing so. Healthcare companies need to continue their dedication towards research and development to be ready for unforeseen circumstances.
How To Be Invested in Pharma Sector?
To be invested in the pharmaceutical sector, you can either go for direct equities of the stocks of various listed pharma companies or go for top pharma mutual funds that have a decent exposure towards the industry. In this space, we shall discuss pharmaceutical sector mutual funds.
Sectoral funds are mutual funds that buy stocks of a particular sector only. Of the various sector funds (like banking and PSU funds, technology funds, etc.) available in India, pharma funds are one of them. The best pharma fund will give you adequate exposure to the industry.
Best Pharma Funds
Here are some of the best performing pharma sector mutual funds sorted in terms of highest returns in the past three years.
Disclaimer: The funds have been picked in order of highest returns in the past five years as on January 27. This is for information purposes only and not a recommendation for the above-mentioned list or the sector that is being discussed in this space. Returns should not be the only parameter you consider before investing in any mutual funds. This is for information purposes only.
Top Pharma Mutual Funds
- Nippon India Pharma Fund
- Tata India Pharma and Healthcare Fund
- SBI Healthcare Opportunities Fund
- ICICI Prudential Pharma Healthcare and Diagnostics
- Mirae Asset Healthcare Fund
About The Sector
India is the largest generics drugs provider in the world. In terms of revenue and employment, Healthcare is one of the largest sectors in India. India grew its share in its pharmaceutical market from 5% to 95% in five decades. This shows that the industry has evolved through the years into becoming self-reliant.
Indian healthcare companies find a lot of demand from other countries. Pharmaceutical exports from India rose 7.57% to $20.58 billion during FY 2019-20. This is the best ever figure for the pharma sector.
Around 25% of the total exports go to the U.S. The role of the U.S. FDA in the Indian pharma industry hence becomes crucial. News of site reinspections, warrants, scrutiny on R&D facilities, drug compositions by the FDA affects the performance of individual pharma stocks.
Performance Snapshot: Pharma Funds and Pharma Index
With the pandemic and a potential vaccine looking like the only solution, all eyes are on the industry. The hope and optimism have helped the stock markets pump money in the sector. According to data available on Value Research, the pharma equity fund category returned around 59% in the past one year, as January 26. The only sector that comes close to that is the technology sector.
Nifty Pharma Index, an NSE index that represents the listed pharmaceutical companies rose 48.47% in the last one year, as on January 27.
However, as a cautionary point, I would like to mention that one year is a concise time frame to decide if you want to invest. This fact has been mentioned here for information purposes only. If you want to invest in the best pharma mutual funds, you will have to look at many other factors.
Factors to Consider Before Investing
Here are a few factors that you can consider before investing in best pharma funds:
Past performance is important but definitely not the only factor. Having an idea of how the fund has fared until the time you are looking to invest gives us a fair idea of how the fund has performed, how has it adjusted to shocks and bubbles and other factors.
Peer Funds for Financials
Any mutual fund can never be judged in isolation. It should always be compared with other funds in the same category. This goes for the best pharma funds as well. For any financial or any metric, all mutual funds may be put on the same pedestal as other peer category funds.
For an in-depth analysis of the fund, you can look at the pharma companies it is invested in and the performance of the companies. Drug approvals, patents, number of quality complaints (if any), R&D expenditure, exports and more pharma-specific factors. These may be helpful when there are any grave irregularities and the fund has significant exposure to the company. This also works the other way around when the fund manager has managed to intelligently in value companies.
Read More on Groww: Overview of the Pharma Industry in India
Any sectoral mutual fund has exposure only to one particular sector. This factor should always be kept in mind before investing in such funds. Looking only at the past performance of the best pharma funds might be a tricky investment decision. It is essential to look at other funds from the same category, study the sector and the factors that affect the sector, what is the outlook of the sector, factors that serve as pitfalls and brownie points and other such characteristics. The healthcare sector is one of the important industries.
All of us know of the famous saying, Health is Wealth. Hence, the performance of the industry, the companies in the sector also becomes essential for the general well being of everyone.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.