Pharmaceutical and healthcare mutual funds top the charts in August, delivering a 5% return

In August, mutual funds Funds focused on the pharmaceutical and healthcare sectors have outperformed, with an impressive average return of almost 4.75%. During this period, around 14 funds in this sector have been actively available on the market.

The WOC Pharma and Healthcare fund, the best in the category, returned 7.28 per cent in the month-to-date period. The ICICI Pru Pharma Healthcare & Diagnostics (PHD) fund returned 5.73 per cent in the same period.

Mirae Asset Health Fund and HDFC Healthcare and Pharmaceuticals Fund In the period mentioned, SBI Healthcare Opportunities Fund, the oldest in the category, returned 5.35% and 5.30% respectively. In the month-to-month period, SBI Healthcare Opportunities Fund, the oldest in the category, returned 4.80%.

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Nippon India Pharma Fund, the largest fund in the category in terms of assets under management, has returned 4.03% in August so far. The fund has assets under management worth Rs 8,139 crore as of July 2024.

What key events contributed to this performance of these funds? How have these funds managed to generate this performance? The expert mentions that the performance of these funds is attributable to a combination of factors and the secretary has been witnessing a strong recovery post Covid-19. “Pharma and healthcare funds have outperformed the market due to a combination of factors. Firstly, their valuations were relatively lower than other sectors like defence and capital goods over the last two years, making them attractive for investors. Secondly, the price pressure on pharma stocks, particularly in the US market, has eased, leading to better performance. Finally, the sector has seen a strong recovery post the COVID-19 pandemic,” said Abhishek Jain, Head of Research, Arihant Capital Markets

During the last week (August 19-23), healthcare and pharma funds delivered returns of over 10%. Around 14 funds delivered double-digit returns, of which 12 were healthcare and pharma funds. Three funds (HDFC Pharma and Healthcare Fund, WOC Pharma and Healthcare Fund and Quant Healthcare Fund) delivered returns of 12.93%, 12.22% and 12.19% respectively during the said period.

As per the annual returns of the last 10 years, mutual funds based on the pharma and healthcare sector had 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 2020, these schemes gave a return of up to 76.90%. In 2022, all the schemes in the category gave negative returns and lost up to 12.71%. In 2023, these schemes came back into the limelight and offered an average return of around 30.58%.

Are you considering investing in these funds? What percentage of your portfolio should you allocate to them?

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According to the expert, an investor should consider investing in these funds through SIP mode with an allocation of 25%.

“While pharma and healthcare funds have delivered impressive returns, it is 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,” advises Jain.

Of the 21 equity mutual fund categories, 17 categories delivered positive returns and four negative returns. Pharmaceutical and healthcare funds dominated the performance chart in August so far, followed by technology-based mutual funds, which returned 2.65%.

Infrastructure funds were the hardest hit in the cumulative period of this month, with losses of around 1.57%. Multinational company funds lost 0.78% in a similar period.

Will these funds remain in the top position in the future? How is the sector expected to perform in the future?

“The outlook for the pharmaceutical and healthcare sector remains positive. Domestic demand is expected to remain stable and Indian companies are increasingly focusing on niche areas. These factors suggest that these funds may continue to perform well in the future. However, it is important to remember that past performance is no guarantee of future results and market conditions can change rapidly,” Jain said.

(Disclaimer: The recommendations, suggestions, views and opinions of the experts are their own and do not represent the views of The Economic Times)

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