- Date : 25/06/2022
- Read: 5 mins
While Pharmaceutical sector mutual funds can provide lucrative returns, there is a key consideration you should make before investing in them. Most importantly, as pharma sector mutual funds predominantly invest in pharmaceutical companies, they lack the diversification of larger funds.
Pharma sector mutual funds are those funds that are focused on and only deal with companies in the pharmaceutical sector. This means that the fund manager will be limited to a certain industry when it comes to investing the money present in the mutual fund.
As per many analysts, the Pharma sector is at an inflexion point. The Indian pharma sector is heavily dependent on Chinese APIs. The government estimates that India imports 68% of APIs from China as it is cheaper. However, Trade Promotion Council, a government-supported organization, puts the figure at 85%. Another independent study puts the figure at 70%. But they highlighted that the dependence is 90% for certain life-saving antibiotics.
This dependence on China might reduce in the future. The reason is the PLI scheme launched by the government of India. As per ICRA, the dependence on China might reduce by 35% due to government incentives. India is already a huge pharma producer, with one in three pills in the USA being produced in India. Also, one in four pills consumed in the UK is produced in India.
Another effort by the government is the establishment of the world's largest pharmaceutical industrial park, Hyderabad Pharma city. It is spread over 19000 acres or 14000 football fields. This city is expected to relieve the world of Chinese dependence on pharmaceutical API.
Top 4 Pharma Mutual Funds to invest in 2022
Nippon India Pharma Fund
Launched- 05 June 2004
Expense Ratio - 1.95% (Regular) and 1.04% (Direct)
Fund Size - ₹4515.92 Crores
Started in 2004, the Nippon India Pharma Fund is one of the largest sectoral pharma funds currently active in India. With an impressive net asset value of over 4500 crore rupees, this equity fund is focused on investing across pharma and healthcare companies to obtain long-term capital growth. Currently, the fund is managed by Mr. Sailesh Raj Bhan.
Tata India Pharma & Healthcare Fund
Launched- 28 December 2015
Expense Ratio - 2.37% (Regular) and 1% (Direct)
Fund Size - ₹508.15 Crores
The Tata India Pharma & Healthcare Fund is one of the latest pharma sector funds on this list. That being said, it has shown a promising 6.65% return per annum and has doubled invested money in about 4 years. Along with this, this fund’s asset allocation is primarily divided between Sun Pharmaceuticals Industries Ltd., Apollo Hospitals Enterprise Ltd., Dr. Reddy's Laboratories Ltd. and other large healthcare firms.
UTI Healthcare Fund
Launched - 01 Aug 2005
Expense Ratio - 2.49% (Regular) and 1.18% (Direct)
Fund Size - ₹706.49 Crores
The UTI Healthcare Fund is a fund under the UTI mutual funds and primarily invests in healthcare and chemical sector companies. It has a decent fund size of nearly 800 crore rupees and has managed to provide a yearly average return of 12.73%. Along with this, the fund is one of the most consistent in this sector and has managed to mitigate losses on various occasions.
SBI Healthcare Opportunities Fund
Launched - 05 July 1999
Expense Ratio - 2.13% (Regular) and 1.07% (Direct)
Fund Size - ₹1638.3 Crores
The SBI Healthcare Opportunities Fund from the State Bank of India was launched in 2013 and currently has an assets under management (AUM) of ₹1736 Crores. Along with this, the fund has an expense ratio of 1.07% which is an average for funds that invest in the pharma sector. However, what makes it one of the best in this sector is its impressive 13.31% annual returns, which have proved impressive.
While Pharmaceutical sector mutual funds can provide lucrative returns, there is a key consideration you should make before investing in them. Most importantly, as pharma sector mutual funds predominantly invest in pharmaceutical companies, they lack the diversification of larger funds. So, in case there is a sudden downtrend in this sector or there is a growth in overall markets, your funds will be limited completely to pharma companies.
So, before investing, it is advisable to have an informed idea of the funds in the sector as well as the companies it is investing in. Apart from this, we would suggest you split your funds between various sectoral funds to avoid being limited to just one specific area of the market.
With that, we believe that this has made your decision to invest in a pharmaceutical sector mutual fund a little simpler. Apart from that, for more financial education to help you invest, visit our site, Tomorrow Makers.