While mutual funds including the likes of large, mid and small cap category and even ELSS for that matter in general on a year-to-date basis have been reportedly generating negative returns, pharma mutual fund category has been an outlier with an unbeatable return of more than 58% in the last 1-year. The benchmark Nifty Pharma for pharma mutual fund category rose proportionately by as much as 51.5 per cent during the same period and by 44 per cent on a year to date basis.
Pharma Mutual Funds Fared Better Than Even Gold Mutual Funds
Pharma mutual funds in fact surpassed the returns generated from gold mutual funds, which has its underlying as gold, that given the economic turmoil and low interest rate regime holds as the best asset class among all investment options currently. Gold mutual funds during the last one-year have generated return to the tune of 37 per cent, while pharma funds on an average yielded return of over 45% on a year to date basis.
As per Value Research, 1-year return of 9 pharma mutual funds is between 48%-70% and among them DSP Healthcare Fund yielded the maximum return of 69.8% in the last one year, followed by Mirae Asset Healthcare and ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund which generated 68% and 63% returns, respectively during the same period.
The total assets under management (AUM) of Pharma mutual fund category is Rs. 9035 crore, with the largest fund being Nippon India Pharma having an asset base of Rs. 3496 crore and 1-year return at 61%.
Why such extraordinary return from Pharma mutual funds?
In the current uncertain Covid 19 times, investors are lapping up defensive stocks, which is one prime reason for the enormous gains for the category. But retail investors should rather stay away and only investors who understand the risk involved in sectoral funds and those with knowledge on how to play such defensive stocks can take their position in the pharma mutual fund or any other sectoral fund category.