What is a Pharma Fund?

India is known to be the ‘pharmacy’ of the world. In simple words, we are one of the largest markets for cost-effective generic drugs, bulk drugs and vaccines. We are also one of the largest producers of key ingredients and raw materials used in various drug formulations.

Pharma mutual funds are sectoral equity-oriented mutual funds that invest primarily in the stocks of pharmaceutical and healthcare companies. In this article, you'll explore how pharma mutual funds could be a suitable addition to your portfolio. 

New Businesses and Growth in India's Pharma Scene

We all know that India is a developing nation with a vast population. Additionally, the Indian economy is developing significantly in terms of social indicators, such as health.

Many new businesses have been set up to cater to needs like preventive healthcare, mental health, treatment of deadly diseases, to name a few. These include the development of newer drugs that can be more effective.

This growth of businesses has made India the third-largest pharmaceuticals market in terms of volume globally.

The Coronavirus Pandemic and Growth in the Pharma Sector

Also, recently the world has started to realise that the Covid-19 pandemic might not leave us soon. As much as the Coronavirus pandemic is a global disaster of mammoth proportions, ironically, it is also an important factor contributing favourably towards the growth of India's pharmaceutical and healthcare industry.

Thus, there is an immense scope to gain and be a part of India's healthcare growth story with Pharma MF.

Growth Potential of Pharma Funds

Pharma mutual funds are sectoral funds meaning they invest a significant portion of their capital in the stocks of companies participating in a particular sector only.

So, here is a point of caution. As much as the pharma sector might be doing great now, the growth of this sector tends to be cyclical subject to the whims of market forces. Therefore, you can invest in these funds if you have a high-risk appetite.

Seeking advice from a certified and registered investment advisor before investing can help you make better investment decisions. The advisor can guide you on the suitable asset allocation to pharma MF.

Reap the Harvest Like a True "Pharm-er"

Pharma funds benchmark indices like the Nifty Pharma and the S&P BSE Healthcare. As risk and return go hand-in-hand, returns from these investments are subjected to comparatively higher market risk. In any case, you can always remember the golden rule of not putting all your eggs in one basket.

Making informed investments in pharma mutual funds can thus help you reap the harvest over time like a true "pharm-er".

Mutual Fund investments are subject to market risks, read all scheme related documents carefully