Numerous experienced market participants are expressing support for the healthcare and pharmaceutical sectors, asserting that they are poised for future success. This sentiment is unsurprising, given the impressive outperformance of the Nifty Pharma Index compared to the broader markets.
As the world contends with emerging diseases and viruses, the focus remains on the healthcare sector. While many other industries faltered amid the instability of global economies, the healthcare sector persists in providing returns to its investors. This is evident in the performance of diverse healthcare stocks and the remarkable earnings reported by pharmaceutical and healthcare mutual funds.
The table below presents several well-known pharmaceutical and healthcare funds, along with their respective five-year and 10-year returns, for your reference.
Name of the fund | Five-year returns (in %) | 10-year returns (in %) |
ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund | 29.22 | - |
Mirae Asset Healthcare Fund | 27.55 | - |
ITI Pharma & Healthcare Fund | 27.15 | - |
SBI Healthcare Opportunities Fund | 26.68 | 17.16 |
Tata India Pharma & Heathcare Fund | 26.40 | - |
| Source: AMFI (As of February 20, 2024) | ||
Furthermore, the pharmaceutical sector has exhibited robust performance in the Indian stock market. This can be attributed to factors such as the worldwide demand for generics, government backing, and the defensive characteristics inherent in the sector.
Those looking to invest in this sector should be mindful of the stringent regulations governing the pharmaceutical industry, as alterations in these regulations may affect profitability. Given the high level of competition both domestically and internationally, Indian companies must consistently innovate and enhance efficiency to sustain their market presence. Additionally, the Indian government enforces price controls on certain essential drugs, potentially restricting profit margins for companies.
Investors must recognize that this is a sector-specific fund, necessitating a long-term investment perspective. The presence of a high-risk factor underscores the importance of having a higher risk tolerance. Engaging in investments in this thematic fund category should be approached with careful due diligence and consideration to prevent potential long-term losses.