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A Pharma and Healthcare Fund is a type of sectoral/thematic mutual fund. As per SEBI regulations, it is required to invest at least 80% of its net assets in equity and equity-related instruments of companies operating in India’s pharma and healthcare sectors.
It is worth mentioning that some AMCs may launch separate mutual fund schemes that invest only in pharmaceutical companies or only in healthcare-related businesses. Whereas others could combine both themes into a single fund.
For example:
The Tata India Pharma & Healthcare Fund invests across both pharmaceutical and healthcare companies within a single plan.
Are you looking to invest in healthcare and pharmaceutical mutual funds? Read this article to first learn about their risk profile and then see how you can pick the “right” healthcare mutual fund in 2026.
Lastly, you will know how to start a Systematic Investment Plan (SIP) with the Tata India Pharma & Healthcare Fund.
Table of Content
What is the “Risk Profile” of Pharma and Healthcare Funds?
As an investor, you must realise that healthcare and pharmaceutical mutual funds have a “narrow focus”. These schemes may generate higher returns when the “healthcare + pharma” sector shows positive market performance, such as during periods of:
Strong demand for medicines
Medical services, or
Healthcare products
However, since the investment is concentrated in a single sector, such schemes are comparatively riskier than the diversified mutual funds. That’s because their performance depends heavily on “sector-specific factors”, such as changes in:
Government regulations
Drug approval policies
Pricing controls, or
Industry conditions
All these factors can influence the earnings and share prices of companies operating in the pharma and healthcare sector. Due to this concentration risk, pharma and healthcare funds may experience a higher volatility (price fluctuations) than diversified funds.
How to Select the “Right” Healthcare and Pharma Mutual Fund in 2026? The 5-Point Checklist
Selecting a pharma and healthcare fund requires more than just checking the past returns! Since these are sectoral funds, performance can change depending on industry cycles and demand trends.
As an investor, you can make the following checks to assess whether a healthcare and pharma fund is suitable for long-term investment:
1. Check Consistency Through “Rolling Returns”
Point-to-point returns can be misleading in sectoral funds. Instead, you may analyse the rolling returns for multiple overlapping time periods. Through such an analysis, you can know whether the fund performs consistently (rather than during only one favourable phase or market rally).
What to check:
3-year and 5-year rolling returns
Comparison with benchmark and peers
Frequency of outperformance
If a fund delivers consistent returns across multiple time periods, it indicates better portfolio management. You may prefer funds with “consistent rolling outperformance”.
2. Evaluate Standard Deviation (Volatility Indicator)
Standard deviation measures how much a fund’s returns deviate from its average. Healthcare and pharma funds usually show higher volatility than diversified equity funds because investments are limited to one sector.
Therefore, comparisons should always be made within the same category rather than against broad-market funds. You may prefer a fund with lower volatility relative to peers, as it indicates better risk management.
3. Check the Sharpe Ratio (Risk vs Reward)
The Sharpe Ratio measures how much return a fund generates for each unit of risk taken. As per industry understanding, a higher Sharpe Ratio may indicate better “risk-adjusted” performance. It means the fund delivers better returns without taking excessive volatility.
For more clarity, let’s study an example related to two pharma funds:
| Scheme | Return | Sharpe Ratio |
| Pharma Fund A | 12% p.a. | 0.65 |
| Pharma Fund B | 12% p.a. | 0.95 |
You may realise that both funds deliver similar returns, but Fund B takes less risk to achieve them. It provides a better return relative to the risk assumed and may be preferred.
4. Study the Maximum Drawdown
A maximum drawdown shows how much the fund can fall. It is the largest decline in a fund’s value from its highest point to its lowest point during a market correction.
By analysing it, you can know how much downside risk you are exposed to. For example, suppose two healthcare funds are offering similar long-term returns.
The drawdowns are:
| Fund | Maximum Fall During Correction |
| Pharma Fund A | 25% |
| Pharma Fund B | 40% |
You may observe that the value of Fund A falls comparatively less during the market downturn. It indicates better downside protection and may be preferred.
5. Examine Portfolio Quality
Besides numbers, you may also analyse “stock holdings” or the portfolio composition of a pharma and healthcare fund. You may prefer schemes that:
Hold established or large-cap pharma companies.
Are diversified and include different segments, such as hospitals, diagnostics, and healthcare service providers.
Do not have excessive exposure to high-debt or regulatory-sensitive companies.
Avoid overconcentration in a few stocks
How To Start an SIP in Tata India Pharma & Healthcare Fund?
The Tata India Pharma and Healthcare Fund is an open-ended equity scheme investing in the Pharma & Healthcare Services Sector. The investment objective of the scheme is to seek long term capital appreciation by investing atleast 80% of its net assets in equity/equity-related instruments of the companies in the pharma & healthcare sectors in India.
However, there is no assurance or guarantee that the investment objective of the scheme will be achieved. The benchmark of this scheme is “BSE Healthcare TRI”, and you are charged an exit load of 0.25% of NAV if redeemed on or before the expiry of 30 days from the date of allotment.
To start an SIP (a minimum of ₹100) in the Tata India Pharma & Healthcare Fund, you may follow this 3-step process:
Step 1: Register or Log In
Visit the Tata Mutual Fund website or download the Tata Mutual Fund mobile app.
If you are a new investor, create an account and complete your KYC. Existing investors can log in using their registered credentials.
Step 2: Select the Pharma Healthcare Fund and Set Up SIP
Once logged in, select the Tata India Pharma and Healthcare Fund and set up your SIP. You will choose:
Investment amount (for example, ₹1,000 or more)
Investment frequency (monthly or quarterly)
SIP date (the day money gets invested each cycle)
Step 3: Set Up Auto-Debit (NACH Mandate)
Authorise your bank to automatically deduct the SIP amount on the chosen date Once this digital mandate is approved (usually through net banking or OTP verification), the SIP amount is deducted automatically and invested without manual action each month.
Besides regular SIPs, Tata Mutual Fund™ also offers you the option of “SIP Top-Up”. Using this feature, you can increase your SIP investment amount in later periods. It allows investors to invest more as their income grows, without starting a new SIP each time.
Conclusion
So now you know what a healthcare and pharma fund is, its risk profile, and how you can select the right scheme to start an SIP in 2026. If we revise, a pharma and healthcare fund is a sectoral/thematic fund that must invest at least 80% of its net assets in the pharma and healthcare sector.
Such funds have a narrow focus and may offer a higher growth potential as compared to diversified funds. At the same time, they can be more volatile, and during periods when the healthcare and pharma sector underperforms, these schemes may deliver lower returns.
To start an SIP in such thematic schemes, you can complete the process online by first registering with Tata Mutual Fund™. After registration, select the scheme you wish to invest in and set up a bank “auto-debit” mandate. Post-successful setup, the SIP amount is invested automatically on the chosen date.
Disclaimer
The views mentioned above are for information & educational purposes only and do not construe to be any investment, legal, or taxation advice. Investors must do their own research before investing. The views expressed in this article are personal in nature and in is no way trying to predict the markets or to time them. Any action taken by you on the basis of the information contained herein is your responsibility alone, and Tata Asset Management Pvt. Ltd. will not be liable in any manner for the consequences of such action taken by you. Please consult your Mutual Fund Distributor before investing. The views expressed in this article may not reflect in the scheme portfolios of Tata Mutual Fund. There are no guaranteed or assured returns under any of the schemes of Tata Mutual Fund.
*Mutual Fund Investments are subject to market risks, please read all scheme related documents carefully.
