Who Should Invest in Pharma & Healthcare Mutual Funds? - Features, Benefits and How to invest?

Health sector mutual funds focus on companies linked to medicine and healthcare. They try to benefit solely from the growth of the healthcare industry. As a result, you may get exposure to a single + potentially fast-growing sector. 

However, your returns depend entirely on how the healthcare industry performs. Thus, thematic funds carry more risk when compared to large-cap or mid-cap funds, which invest in companies from various sectors (such as banking, IT, energy, healthcare, and consumer goods). 

Before committing your money, check out some key features of this financial product below:

In India, the healthcare sector is growing. A study by IBEF.org (a trust established by the Ministry of Commerce) found that by the end of 2025, it is expected to reach about ₹54.7 lakh crore (US$638 billion) at an impressive CAGR of 17.5 to 22.5%. Additionally, the report states that:

• India is now spending more of its GDP on healthcare (from 3.3% in 2022 to a projected 5% by 2030)

• Private hospitals are also expanding, and in FY26, they plan to add 4,000 new beds by investing ₹11,500 crore (Source: IBEF).

As a healthcare mutual fund investor, you may benefit from this potential steady + long-term growth. Additionally, some other benefits of investing in pharma and healthcare funds are:

1. Stability in Tough Times

   Healthcare products and services are usually considered “evergreen”.  Medicines, hospitals, and diagnostics don’t lose demand even when the economy slows down. 

   Due to this constant need, healthcare mutual funds may remain more stable compared to funds investing in sectors that depend heavily on consumer spending or economic cycles.

    

2. Diversification Within Healthcare

   The healthcare industry includes many sub-sectors, such as:

   • Pharmaceuticals

   • Biotechnology

   • Hospitals

   • Diagnostics

   • Medical devices, and more

     Each sub-sector comes with its own opportunities and risks. By investing in a healthcare mutual fund, you may get exposure to all these segments rather than relying on a single company or niche. 

     This diversification reduces risk, as underperformance/ weakness in one area (for example, hospitals) can be balanced by strength in another (such as drug manufacturing or medical technology).

      

3. Managed by Experts

   A pharma and healthcare fund is run by experienced managers who study the sector closely. Before choosing where to invest, they may analyse:

   • Company performance

   • New technologies

   • Government policies

   • Global healthcare trends

     Post-investing, they also adjust holdings based on changing market conditions. For individual investors, doing this level of research and monitoring is usually considered tough.

      

4. Easy to Invest and Withdraw

   Healthcare mutual funds are simple to invest in! You can start with a one-time lump-sum amount or a systematic investment plan (SIP). These funds are also highly liquid, and investors can redeem their units at the prevailing Net Asset Value (NAV) whenever they need funds.

    

5. Potential for Strong Returns

   There are market phases when the healthcare sector performs better than the overall market. This usually happens due to:

   • Innovation

   • New drug launches

   • Rising healthcare spending

     During such phases, health sector mutual funds may potentially deliver higher returns than diversified funds. Since they are only exposed to a single sector, such schemes potentially benefit comparatively more from “sector upswings”.

     However, investors should remember that the same focus also means higher risk if the sector slows down. 

If you are planning to invest in pharma mutual funds, Tata Mutual Fund™ provides two different options:

1. Tata Nifty MidSmall Healthcare Index Fund

   and

2. Tata India Pharma and Healthcare Fund (an equity fund)

Both schemes can be invested in through SIP or lump-sum modes and are available in Growth and IDCW (Income Distribution cum Capital Withdrawal) options. Investors can also choose between Regular and Direct plans based on their preference. 

For better understanding, let’s look at each of these thematic funds in detail:

An open-ended scheme replicating/tracking Nifty MidSmall Healthcare Index (TRI)

It is a Nifty Pharma index fund, which mirrors the performance of the Nifty MidSmall Healthcare Index. For those unaware, the index includes up to 30 midcap and small-cap healthcare stocks, which are chosen based on their free-float market capitalisation. To maintain index balance, 

• No single stock can have more than 33% weight

  and

• The top three together cannot exceed 62%

Additionally, the index is updated twice a year and rebalanced every quarter to reflect current market conditions.

An open-ended equity scheme investing in the Pharma and Healthcare Services Sector

Tata India Pharma and Healthcare Fund is a thematic mutual fund that focuses on companies in India’s pharma and healthcare sectors. The fund invests at least 80% of its assets in equity and equity-related instruments of these companies to achieve long-term capital growth. However, returns as well as investment amount are not guaranteed / assured and may vary with market performance.

Additionally, this fund uses the Nifty Pharma Index as a reference, which tracks the performance of 20 major pharmaceutical companies listed on the National Stock Exchange (NSE).

Tata India Pharma & Healthcare Fund: Understanding Healthcare and Pharma Investment Opportunities

Investing in thematic schemes offered by Tata Mutual Fund™ is simple and can be done completely online through the official mobile app or website. Let’s see how you can invest in three easy steps:

Step I: Download the App or Visit the Website

Get the Tata Mutual Fund™ app from your smartphone’s app store or visit the official Tata Mutual Fund website - www.tatamutualfund.com. Both platforms allow you to browse, compare, and invest in different funds.
 

Step II: Register or Log In

Create a new account by providing your details and completing the KYC process. If you are an existing investor, simply log in with your credentials.
 

Step III: Explore Thematic Funds and Invest

Browse through the available pharma mutual fund options and read about their:

• Investment objectives 

• Risk levels

• Exit load

• Benchmark, and other important details

Now, select the pharma and healthcare fund that suits your investment goals and risk appetite. Then, decide whether to invest a lump-sum amount or start an SIP. Once the transaction is complete, you will receive confirmation, and your investment will begin reflecting in your account.

So now you know that pharma sector / theme based mutual funds are schemes that invest at least 80% of their assets in equity and equity-related instruments of companies operating in the healthcare sector. These funds focus on a single investment theme and may deliver higher returns when the sector performs strongly. However, they also face larger losses during periods of underperformance, as they are not diversified across multiple sectors.

Some major benefits of investing in such thematic mutual funds may be:

• Exposure to a potentially high-growth industry

• Potential Stability during economic slowdowns

• Diversification within healthcare segments

• Professional management and research support

• Flexibility through SIP and lump-sum modes

If you are looking to invest in such financial products, Tata Mutual Fund offers multiple options, including an index funds and an actively managed equity funds tracking different sectors / theme.