Due to the underperformance of pharma and healthcare shares for past three years which left no space for potential upside, Fund managers believe that share valuation of the pharma companies are cheaper than others. So for these reasons domestic mutual funds are coming up with schemes that will invest the majority of its assets in healthcare and pharmaceutical companies to tap the potential upside as the sector got bruised up in the past 3 years.
A news says that pharma and healthcare funds have already been launched by ICICI Prudential Mutual Fund and Mirae Asset Mutual Fund, whereas Aditya Birla Sun Life Mutual Fund for doing the same is working on approval from Exchange Board of India.
In the last few years, the pharmaceutical industry was bruised up very badly and the sector suffered this downfall because of the pressure on pharmaceutical companies to reduce its prices to cope up with the Indian competitive market.
Senior analyst at the fund house and The fund manager of Mirae Asset Healthcare Fund, Vrijesh Kasera said that”There was a lot of froth in terms of both earning expectations and valuations in the past three years”. He also added that “If we look at the recent trend that’s emerging from the US market, commentary from global pharma companies indicate early signs of stabilization in the market, with players vacating the market which has become economically unviable. The investments on R&D front are also being recalibrate
d and costs being monitored closely,”
Regarding this one of our sources said that for a better market in future the fund manager will invest the funds in equity and equity-related securities of companies which are benefiting directly or indirectly from the healthcare and pharmaceutical sectors in India, according to a scheme information document.
Our source further added that according to this scheme, the majority of the assets will be distributed among pharma and healthcare-related sectors. Where healthcare sector includes subsectors such as hospitals, diagnostics, medical insurance, medical equipment, fine chemicals and other allied sectors, and most of these sub-sectors, unlike pharma, generates the majority of its revenues from the domestic market.
The asset managers believe that as there is lack of medical infrastructure and facilities in India so there are a lot of opportunities for the holders to grow and overtake the market.
Currently, MF industry offers four healthcare funds and in the recent months, Reliance Pharma Fund is on the top in terms of performance and has delivered the highest 8.95 percent. Barring SBI Healthcare Opportunities Fund, the other two schemes –Tata India Pharma & Healthcare Fund have delivered positive returns in the range of 1.-3.8 percent.