Summary: Harnessing India’s booming pharmaceutical and healthcare market boost capital gains become the new norm. Investors and traders are largely focusing on healthcare segments for long-term appreciation via some of the leading pharma mutual funds.
The pharmaceutical sector in India is a beacon of growth and innovation. Backed by robust R&D capabilities and a massive pool of skilled personnel, India’s pharma industry has emerged as hub of promising investment opportunities. With the aim of participating in the nation’s expanding healthcare market, several investors are turning to pharma sector funds. In this blog, we will look at the best pharma mutual funds in the country. But before that let’s understand what pharma mutual funds are and their benefits.
Understanding pharma mutual funds
Pharma mutual funds are a type of mutual fund that mainly invests in securities and stocks associated with pharma and healthcare companies. These funds fall under the umbrella of healthcare sector mutual funds and provide investors significant exposure to different pharmaceutical and healthcare entities. This helps them tap into new avenues and gain from the growth/revenue earned by those companies.
Medical devices, biotechnology and healthcare equipment are some of the industries that traders can enter via pharma mutual funds.
Benefits of investing in pharma mutual funds
Investing in pharma sector funds offers a myriad of benefits including:
- Diversification: Such an investment allows exposure to a diversified portfolio of pharma and healthcare stocks, which spreads risks and reduces the impact of a dip in performance.
- Potential for growth: Driven by rising healthcare spending, medical advancements and aging population, pharma sector is growing at a tremendous rate.
- Professional management: Mutual funds are ideally managed by experienced professionals with in-depth understanding of the pharma industry to help traders make informed investment decisions.
- Research and analysis: Mutual fund managers are well equipped to conduct a thorough research of pharma companies and evaluate their regulatory compliance, financial health, and product pipelines.
- Liquidity: These funds are often highly liquid, allowing you to buy/sell shares on any business day at the current net asset value (NAV) which ensures flexibility and access to your investment.
- Passive and active options: Passive funds replicate the performance of a pharmaceutical index, whereas active funds imply selecting stocks to outperform the index. You can choose from both.
- Risk mitigation: Investors often use pharma mutual funds as a shield. Despite high volatility, diversified portfolio helps spread risk and curb potential losses.
- Dividend income: Several pharma companies offer dividends to the shareholders. Hence, investing in a fund may provide a source of dividend income to the income-focused investors.
Best pharma mutual funds in India
Now that we have an overview of these funds and how pharma sector funds can boost investment gains, let’s check out the top pharma mutual funds in India.
| ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund | This fund from ICICI Prudential focuses on pharmaceuticals, healthcare, and diagnostic companies. It offers a mix of large and mid-cap stocks, making it a well-rounded option for investors. |
| SBI Healthcare Opportunities Fund | Managed by SBI Mutual Fund, this fund aims to invest in healthcare and pharmaceutical companies with growth potential. It offers a diversified portfolio of both large and mid-cap stocks in the sector. |
| Aditya Birla Sun Life Pharma & Healthcare Fund | Managed by Aditya Birla Sun Life Mutual Fund, this fund seeks to invest in pharmaceutical and healthcare companies with strong growth prospects. It has a history of consistent performance. |
| DSP Healthcare Fund | DSP Mutual Fund's healthcare fund concentrates on companies within the pharmaceutical and healthcare sectors. It provides exposure to a mix of large-cap and mid-cap stocks, thereby balancing risk and potential returns. |
| Franklin India Pharma Fund | This fund from Franklin Templeton targets the pharmaceutical and healthcare industry in India. It's a well-established option for those looking for exposure to this sector. |
| HDFC Healthcare Fund | Managed by HDFC Mutual Fund, this fund focuses on pharmaceutical and healthcare companies. It offers a diversified portfolio, including both large and mid-cap stocks. |
| Tata India Pharma and HealthCare Fund | The primary goal of the scheme is to gain long-term capital appreciation by investing a minimum of 80% of its net assets in equity or similar instruments of pharma and healthcare companies. |
| Kotak Healthcare Fund | Kotak Mutual Fund's healthcare fund primarily invests in pharmaceutical and healthcare stocks. It's a suitable choice for investors seeking a focused approach to the sector. |
| UTI Healthcare Fund | This fund from UTI Mutual Fund seeks capital appreciation by investing in companies within the pharmaceutical and healthcare sector. It offers a mix of large and mid-cap stocks. |
| Nippon India Pharma Fund | Formerly known as Reliance Pharma Fund, Nippon India’s pharma fund is dedicated to the pharmaceutical and healthcare sectors. It aims to deliver capital growth over the long term. |
Investing in pharma: Your guide to informed decision making
As you saw, there are innumerable options when investing in today’s dynamic and rapidly expanding pharmaceutical industry. However, to make conscious decisions it is essential to take into consideration your risk tolerance and investment horizon. Risk tolerance is key to sustaining within a volatile pharma sector. Meanwhile, determining your investment horizon can help identify most suitable funds as some are more suited for long-term investors than others. It is also important to evaluate the historical performance of the company, expense ratio of the fund and the track record of the fund manager.