Pharma funds are a type of sectoral funds that invest in pharmaceutical companies. Sectoral funds are equity funds that invest in stocks of a particular sector/industry. Investing in pharma funds can be highly rewarding during bull markets.
Interested to invest? Here’s a list of 10 best pharma mutual funds to invest in 2023. Read on!
The following are the best pharma mutual funds in India 2023 where you can invest:
|Nippon India Pharma Fund||NAV: ₹270.58|
Expense Ratio: 2%
|Tata India Pharma & Healthcare Fund||NAV: ₹15.8|
AUM: ₹485.91 Crore
Expense Ratio: 2.44%
|UTI Healthcare Fund||NAV: ₹143.40|
AUM: ₹655.16 Crore
Expense Ratio: 2.54%
|ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund||NAV: ₹18.64|
AUM: ₹25381.1 Crore
Expense Ratio: 2.12%
|Mirae Asset Healthcare Fund||NAV: ₹20.11|
AUM: ₹1505.43 Crore
Expense Ratio: 2.11%
|SBI Healthcare and Opportunities Fund||NAV: ₹217.18|
Expense Ratio: 2.2%
|DSP Healthcare Fund||NAV: ₹20.91|
AUM: ₹1197.58 Crore
Expense Ratio: 2.26%
|Aditya Birla Sun Life Pharma Healthcare Fund||NAV: ₹16.36|
AUM: ₹425.46 Crore
Expense Ratio: 2.52%
|IDBI Healthcare Fund||NAV: ₹15.81|
AUM: ₹49.29 Crore
Expense Ratio: 2.49%
|ICICI Prudential Nifty Pharma Index Fund||NAV: ₹9.3|
AUM: ₹11.18 Crore
Expense Ratio: 1.03%
Nippon India Pharma Fund is one of the best pharma mutual funds. It was launched on January 2, 2013 and it invests in selective equities to earn higher returns. Nippon India Pharma Mutual Fund invests in equity funds of large companies belonging to the pharma sector. Kinjal Desai, Akshay Sharma and Sailesh Raj Bhan are the present fund managers of this scheme.
Tata India Pharma & Healthcare Fund is one of the top pharma mutual funds. Meeta Shetty is the fund manager who handles this scheme. Investors with a high-risk appetite and professional knowledge of this market can invest in this scheme. Tata India Pharma & Healthcare Fund holds 98.21% investment in domestic equities across large cap, mid cap and small cap companies in the pharma sector.
UTI Healthcare Mutual Fund is one of the best pharma mutual funds in India. It was launched for investors on January 2, 2013. Deepesh Agarwal and V Srivasta are the fund managers of this scheme. This fund holds 97.84% investment in equity funds of which 36.92% is in large cap, 22.1% in mid cap and 15.03% in small cap stocks. The UTI Healthcare Fund also invests 0.18% in debt securities, mainly government securities.
ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund was launched for investors on July 13, 2018. Sharmila D’Mello and Dharmesh Kakkad are the fund managers of this scheme. This top pharma mutual fund holds 94.85% investments in domestic equities that include large cap, mid cap and small cap stocks. Investors with a high-risk appetite and advanced knowledge of this market can invest in this sectoral fund. However, they must be aware of the risks of moderate to massive losses.
Mirae Asset Healthcare Fund was incorporated for investors on July 2, 2018, and since then, it has generated 19.38% in annualised returns. Vrijesh Kasera is the fund manager of this scheme. It is one of the best pharma mutual funds and has 99.9% of its investments in domestic equities across market capitalisation. Investors with high-risk capacity can invest in this mutual fund scheme but they must be mindful of the possibility of massive losses.
This pharma sectoral fund was launched on January 2, 2013. Mohit Jain and Tanmaya Desai are its current fund managers. It invests 97.54% of its investments in domestic equities across large, mid and small cap companies. It aims to bring long-term capital appreciation for investors while focussing on portfolio diversification by investing in pharmaceutical companies.
This fund was launched on November 30, 2018, and it has delivered 22.15% in annualised returns since then. Chirag Dagli, Jay Kothari and Vinit Sambre are the current fund managers of this scheme. This fund invests 83.9% of its total assets in domestic equities across market capitalisation. These types of funds are fit for seasoned investors with a high-risk appetite and a thorough knowledge of the market space.
Aditya Birla Sun Life Pharma Healthcare Fund was launched on July 10, 2019. Dhaval Shah is the present fund manager handling this scheme. This fund holds 96.63% of its assets in domestic equities across market capitalisation. This scheme aims for long-term capital gain by investing in equity and equity related instruments in healthcare, pharmaceutical and allied companies in India. This scheme has an exit load of 1% if you sell your funds within 30 days.
The IDBI Healthcare fund was launched on February 28, 2019. Alok Ranjan is the present fund manager of this scheme. This fund holds 97.07% of its investments in domestic equities across large, mid and small cap company stocks. Investors with advanced knowledge and high-risk appetite may find these funds suitable. This pharma mutual fund charges a 1% exit load if you redeem the fund before a year.
This scheme was launched very recently on December 14, 2022 and is one of the top pharma mutual funds. Kayzad Eghlim and Nishit Patel are the present fund managers running this scheme. This fund holds 99.15% investments in domestic equities across market capitalisation. It aims to invest in companies with securities in the Nifty Pharma Index with minimal tracking errors. Furthermore, seasoned individuals with a high-risk appetite and comprehensive knowledge of the market can invest in this pharma fund.
Mutual funds cater to investors with common investment motives to park their money in their respective schemes. A sectoral fund is a certain type of equity mutual fund that invests in companies in a particular sector. For example, an IT fund will invest in IT companies, a banking fund will invest in banks and a pharma fund will invest in stocks of pharmaceutical and healthcare companies.
This means as a sectoral fund, pharma mutual funds can only invest in this particular industry even when the market is down. In such scenarios, investors of pharma funds can face huge losses until the market stabilises again. However, due to the high concentration of their portfolios, these funds can offer massive gains if the sector performs well.
Like any other mutual fund scheme, the top pharma mutual funds follow similar working procedures. Whenever a fund house launches a new scheme, they pool funds from investors and invest in stocks of major pharmaceutical companies, biotechnology firms, hospital management firms, research facilities, etc. As per SEBI regulations, 80% of the total assets of these funds must be invested in the pharma sector.
The fund managers managing these schemes conduct thorough and comparative research on these schemes. This helps to find the best-fit security for investors to earn substantial returns. In case, some securities do not perform well, fund managers will replace them.
Since these types of thematic funds focus highly on investing in the equities of large companies, they possess a high-risk factor. People with a high-risk appetite who want to capitalise on returns can invest in pharma funds.
These funds generally tend to outperform the benchmarks when the sector is performing well. On the other hand, however, when the sector takes a hit, the losses can be magnified. This can be handled by investing long-term in a particular pharma fund. Risk-averse investors are advised to stay away from such funds.
Thematic mutual funds like this usually invest in large companies’ stocks, as a result, they come with high credit risk. These funds tend to bring in higher returns when the pharma sector is performing well. However, one can face massive losses when there is a drop. Also, these mutual funds bring in better results if one invests for the long term.
Here is how you can invest in pharma mutual funds:
Knowing your investment goals will help you know your risk appetite and investment horizon and formulate a profit plan. You need to have a clear idea of your investment goal to grow your portfolio. Avoid comparing your goals with your peers as this will lead to confusion and investment errors.
Pharma mutual funds are suitable for seasoned investors with a massive risk appetite. Experienced individuals who are aware of the market trends will know when a sector will flourish. Novice investors can seek help from financial advisors to find the best pharma mutual funds.
The expense ratio is a fee an investor needs to pay to fund houses to manage administrative expenses. These are a small portion of assets under a mutual fund scheme. If the fund’s total assets are small, its expense ratio can be high. This is simply because a scheme needs to meet its expenses from a small asset base. While investing in sectoral equity funds, investors need to especially focus on their expense ratio.
It is also important to note that the greater the expense ratio levied on your investments, the lesser will be your overall returns.
While investing in sectoral funds like pharma mutual funds, one must consider their return consistency on a gross level. You need to choose a scheme with highly consistent returns to boost your portfolio.
However, it can happen that a fund that performed previously might not show the same performance today. Therefore, it is also important to study other parameters along with a fund’s return consistency before investing.
To study the consistency of returns, you need to study the scheme’s past performances. By analysing them, you can gather meaningful insights into a fund’s future. Funds that have been properly managed will perform well in most years. This makes them more likely to perform well in the future than poorly-managed funds.
Therefore, to have better clarity about a pharma mutual fund’s performance, you must study its performance compared to its benchmark and peers.
Since these funds are high-risk-high-reward, bull markets can fetch significant returns for pharma mutual funds. Growth of a particular sector can guarantee even higher returns and these types of funds are perfect for wealth multiplication within a time horizon of approximately 3 years.
Pharma mutual funds are sectoral and investing in such funds is guaranteed to improve the sector as well. This also indirectly helps in the growth of the nation’s economy. Conversely, certain government policies may also affect pharma mutual funds heavily. The right timing of entry and exit from these funds is crucial to capitalise on the returns and for this, the investors need to be experienced or have financial advisors who help them.
The tax structure of pharma funds is similar to other equity funds. When you sell your pharma mutual fund units within a year, you earn short-term capital gains. In contrast, on selling your assets after 1 year, you get long-term capital gains.
For long-term capital gains under ₹1 lakh, there is no taxation involved. However, if your long-term capital gains exceed ₹1 lakh, there will be 10% taxation applicable. Indexation benefits are not available on equity funds. On the other hand, Short-term capital gains will be taxed at a 15% rate.
Dividends from mutual funds are added to an investor’s yearly income and its taxation depends on one’s income tax slab. There is also a 10% TDS deduction on dividends exceeding ₹5,000 that an investor earns by investing in pharma mutual funds.
Pharma mutual funds are great investment options for investors looking to invest in pharmaceutical companies. But, before investing in one of the best pharma mutual funds 2023 listed above, understand the risks of losses and the time period you will need to get meaningful gains.
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If your overall equity portfolio lacks exposure to the healthcare sector, you can invest in a pharma mutual fund. However, you must have a very high-risk appetite and a long-term investment horizon. It is also important to keep your exposure in any one sector low.
The five best mutual fund schemes for you to invest in the pharma sector are:
1. SBI Healthcare Opportunities Fund
2. UTI Healthcare Fund
3. Nippon India Pharma Fund
4. Tata India Pharma and Healthcare Fund
5. DSP Healthcare Fund
Like every sectoral mutual fund, pharma mutual funds invest most of their money in a particular sector. This makes pharma mutual funds an extremely risky investment. Therefore, people with a low-risk appetite must avoid investing here.
Despite being a risky investment, pharma mutual funds hold the potential for large profits when the pharmaceutical market is on a bull run. This was evident in the 2020-21 period when there was a high demand for pharma products. As India’s healthcare system expands and improves, there will likely be similar chances of getting high returns.
You can invest in pharma mutual funds by following the same steps as any other mutual fund. You can either invest by visiting the online portal of your preferred mutual fund house. To invest online, simply go to their website, pick a fund and enter the investment amount and mode (SIP or lump sum). After that, you have to enter some basic details and complete the KYC requirements. Finally, you can complete the transaction.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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