WOC Pharma and Healthcare Fund, the topper in the category, gave a 7.28% return in the month-to-date period. ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund gave a 5.73% return in the same period.
Mirae Asset Healthcare Fund and HDFC Pharma and Healthcare Fund delivered 5.35% and 5.30% returns respectively in the said time period. SBI Healthcare Opportunities Fund, the oldest fund in the category, delivered a 4.80% return in the month-to-date horizon.
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Nippon India Pharma Fund, the largest fund in the category based on assets managed, gave a 4.03% return in August so far. The scheme manages assets of Rs 8,139 crore as of July 2024.
What key events contributed to this performance by these funds? How have these funds managed to deliver this return?The expert mentions that the performance of these funds is attributable to a combination of factors and the sector has been witnessing a strong recovery post-Covid – 19.“Pharma and healthcare funds have been outperforming the market due to a combination of factors. First, their valuations were relatively lower than other sectors like defense and capital goods for the past two years, making them attractive to investors. Second, the pricing pressure on pharma stocks, particularly in the US market, has eased, leading to improved performance. Finally, the sector has seen a strong recovery following the COVID-19 pandemic,” said Abhishek Jain, Head of Research, Arihant Capital Markets
During the last week (August 19 – 23), the pharma & healthcare funds have offered over 10% return. Around 14 funds gave double-digit returns, out of which 12 were from pharma & healthcare funds. Three funds – HDFC Pharma and Healthcare Fund, WOC Pharma and Healthcare Fund, and Quant Healthcare Fund – offered 12.93%, 12.22%, and 12.19% returns respectively during the said period.
Based on the yearly returns for the last 10 years, the pharma & healthcare sector-based mutual funds have negative returns in 2016 and 2022. The schemes lost around 12.24% and 9.84% in 2016 and 2022 respectively. During the Covid-19 period in 2020, these schemes offered the highest average return of around 66.47%.
In the year 2020, these schemes gave up to 76.90% return. In 2022, all schemes in the category gave negative returns and lost up to 12.71%. In 2023, these schemes made a comeback and offered an average return of around 30.58%.
Are you considering investing in these funds? What portion of your portfolio should be allocated to them?
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According to the expert, an investor should consider investing in these funds via SIP mode with an allocation of 25%.
“While pharma and healthcare funds have delivered impressive returns, it’s essential to maintain a balanced portfolio. Consider allocating 10-15% of your investments to these funds. For a more consistent approach, consider investing in these funds through a Systematic Investment Plan (SIP) with a 25% allocation,” recommends Jain.
Out of 21 equity mutual fund categories, 17 categories gave positive returns and four gave negative returns. Pharma & healthcare funds ruled the return chart in August so far followed by technology-based mutual funds which gave a 2.65% return.
Infrastructure funds were the worst hit in the month-to-date period which lost around 1.57%. MNC funds lost 0.78% in a similar period.
Will these funds continue to be in the first position going ahead? How is the sector expected to perform going forward?
“The outlook for the pharma and healthcare sector remains positive. Domestic demand is expected to remain steady, and Indian companies are increasingly focusing on specialty areas. These factors suggest that these funds may continue to perform well in the future. However, it’s important to remember that past performance doesn’t guarantee future results, and market conditions can change rapidly,” said Jain.
(Disclaimer: Recosmmendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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