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Data from the Motilal Oswal Financial Services Indian Mutual Fund Tracker shows that 15 out of 21 fund houses, around 71%, are overweight on healthcare.
Over one year, pharma stocks have delivered 8.8% returns, compared with 4.13% for the Nifty 50.
Domestic mutual funds are steadily increasing their exposure to healthcare and pharmaceutical stocks, with a majority of fund houses now running overweight positions in the sector as growth visibility improves and portfolios get repositioned amid volatile markets.
Data from the Motilal Oswal Financial Services Indian Mutual Fund Tracker shows that 15 out of 21 fund houses, around 71%, are overweight on healthcare compared with their benchmark allocations.
Healthcare accounted for 7.3% of total mutual fund portfolios in February 2026, making it the fourth-largest sector allocation after private banks, automobiles and capital goods. The sector’s weight in portfolios has been rising month-on-month, suggesting continued buying even as broader markets remain under pressure.
Pharma holds up better than broader markets
The move also comes as pharma stocks have shown greater resilience compared with the benchmark Nifty 50 during the recent market correction.
The Nifty Pharma Index has remained relatively stable even as the broader market has declined sharply.
Over the past month, the pharma index has gained 0.2%, compared with an 8.9% decline in the Nifty 50. On a year-to-date basis, pharma has slipped 0.8%, significantly outperforming the benchmark’s 10.3% fall.
The longer-term trend also reflects stronger performance. Over one year, pharma stocks have delivered 8.8% returns, compared with 4.13% for the Nifty 50, while over the past three years the sector has risen 93%, far ahead of the benchmark’s 37% gain.
Fund houses increase allocation
Some fund houses have taken particularly large positions in the sector.
Invesco Mutual Fund has allocated about 13% of its portfolio to healthcare. Meanwhile Axis Mutual Fund, Canara Robeco Mutual Fund, and Motilal Oswal Mutual Fund have allocations close to 10%.
Exposure at HSBC Mutual Fund is above 9%, compared with a benchmark weight of around 5.4% in the BSE 200.
Larger asset managers such as HDFC Mutual Fund, ICICI Prudential Mutual Fund, and SBI Mutual Fund remain closer to benchmark allocations.
Across portfolios, key healthcare stocks such as Sun Pharmaceutical Industries, Dr. Reddy’s Laboratories, Biocon, and hospital chain Apollo Hospitals Enterprise continue to feature prominently.
Pharma seen as defensive growth sector
Viraj Kulkarni, Fund Manager at Bandhan Mutual Fund, said the pharma sector remains structurally strong and is expected to grow faster than the broader economy.
“Pharma is an evergreen space that should grow faster than GDP over a three- to five-year period,” he said, citing rising healthcare spending and an ageing population.
Kulkarni added that the sector also tends to perform well during periods of market uncertainty.
“Pharma, generally, and exports. Volatility over the last year has been very high in the market. And so in highly volatile markets, people look at liquidity. So pharma is a good defensive bet,” he explained.
He noted that valuations have become more reasonable after a period of underperformance, while recent data indicates improving domestic formulation growth and steady hospital performance.
“We were underweight about a year ago, but over the last five to six months we have moved overweight and have been actively adding exposure,” he said.
Hospitals, GLP opportunity on radar
Prateek Agrawal, CEO of Motilal Oswal Asset Management Company, said the fund house is positioned to capture emerging opportunities in the sector.
“We are not underweight. We are very clued on to the GLP opportunity, and most of our funds have an exposure to a GLP play,” he said.
Agrawal added that hospital companies offer clearer growth visibility compared with other healthcare segments.
Hospitals, he said, “present a more predictable and higher growth trajectory” and therefore feature across most portfolio constructions.
Earnings recovery supports outlook
Analysts say the sector’s outlook is improving as earnings recover and demand trends strengthen.
Thomas Abraham of Mirae Asset Sharekhan noted that recent quarters have shown a pickup in performance.
“Double-digit growth driven by domestic formulations and emerging markets, while margins are stabilising as pricing pressure in the US eases,” he said.
Looking ahead, he added that the industry’s growth drivers are likely to shift towards higher-value therapies.
“Looking 12 to 24 months ahead, the industry’s storyline will emphasize domestic formulations, chronic therapies, complex generics, and biosimilars. These areas gain support from capital investments aimed at higher-value products. On a structural level, the medium-term outlook for Indian pharma stays positive,” Abraham said.
Risks remain
Despite the improving outlook, experts caution that risks remain across different healthcare segments.
Hospital operators may face regulatory risks such as price caps, along with rising competition in certain cities. Domestic pharma companies could see pressure from the growing use of generics, while export-focused players remain exposed to regulatory scrutiny and compliance risks, particularly in the US market.
Kulkarni also cautioned that the defensive nature of pharma could limit upside if the broader market enters a strong bull phase, as investor capital may shift towards more cyclical sectors.
March 18, 2026, 10:29 IST
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