April 13, 2024


Savvy business masters

Why to start investing in pharma mutual funds in 2021

The world has seen the devastating impact of the COVID-19 pandemic. Health has unexpectedly become a priority over everything since March 2020. As a result, the health sector has become a focus even for the GDP.

Now, it is a known fact that the prevailing sentiments have the tendency to influence the stock market. The post COVID phase, with an increase in the consumption of healthcare products and services, have favourably impacted the fortunes of many pharma companies and sector-specific funds.

How the Nifty pharma index has performed, from March 2020 to July 2021

Source: https://www.moneycontrol.com/mc/indianindices/chart?indice_id=41

  • A resistance (black horizontal line from March 2020 to May 2020) was formed at Rs. 8,500. It breached the resistance and piled up to Rs. 14,597 till date (i.e., index return of 71% from the level of Rs. 8,500).

As per the recent Indian Economic Survey 2021 by the Ministry of Commerce and Industry, the domestic market of the pharmaceutical industry is expected to grow up to three times in the coming decade of 2030. The domestic market itself is estimated at around US $42 billion in 2021 and the same is expected to grow up to US $65 billion by the year 2024.

What are pharma funds?

  • Pharma funds are sectoral mutual funds that invest the money only in pharmaceutical and healthcare companies
  • The fund may be a mix of debt and equity. The fund managers invest money in a variety of pharma companies as per market capitalisation to earn attractive returns for the investors
  • Since pharma sector stocks are volatile, the returns from pharma funds are also not fixed

Pharma funds latest update to make proper investment decisions

India ranks third in the world in terms of the volume of pharmaceutical production. Under new developments, the Health Ministry has pushed for an increased expenditure on public health. The government plans to spend 2.5% of the GDP on public health by 2025. Presently, the spending is 1.29% of GDP. Hence, it is a positive sign for pharma funds in India.

Pharma funds portfolio

One of the most famous pharma funds is Nippon India Pharma Fund. The holding of the fund is as follows:

  • Nippon India Pharma fund invests in 47 schemes. A monthly SIP of Rs. 1,000 for five years can help you get Rs. 1.23 lakh with annual returns of 29.31%. However, markets are subject to risks

Sectoral funds in specific are high-risk investments. Hence, pharma funds are recommended for those categories of investors who are not averse to taking risks. The percentage of your investment portfolio that should be invested in pharma funds depends on your short-term and long-term financial goals, and your appetite for taking risks. 

For any mutual fund investment, risks and returns have a direct correlation – higher the risks, higher the returns, and vice versa. If you are willing to take risks and want to opt for pharma funds, it is always better to act under the guidance of a financial expert. 

Reach out to one today who can help better your investment journey with personalised plans to achieve your goal of wealth creation.