Ask Money Today: Is it good time to invest in pharma mutual funds?

Pharma mutual funds have topped the charts in the last year with over 70 per cent returns on an average. Top schemes like DSP Healthcare Fund has given over 80 per cent returns in the one year period. Many other schemes have delivered wonderful double-digit returns. I have read some equity reports which state that there is still some steam left in this sector. Can I invest in DSP Healthcare Fund or any other good mutual fund scheme in the pharma space now? Is it the right time? Please tell me good names in pharma space.

-Harish M

By Raghvendra Nath, MD, Ladderup Wealth Management

There is no doubt that pharma has been the theme for the year and is perhaps one of the best performing sector in the last one year. However the problem with thematic funds is that they are a bit cyclical in nature, hence you don't want to get caught on the wrong end of the curve. Given the rally we have seen in the last nine months we are definitely not in the value buying zone currently as most of the stocks are priced fairly.

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Though the longer term outlook for the sector is definitely positive, I believe that the near term upside may have been already captured. It would be more preferable to select a diversified fund with high pharma exposure or with more exposure towards the ingredients manufacturing space. However, if you understand the risks involved in thematic funds as explained above, from healthcare funds stand point you can look to invest into DSP Healthcare and Mirae Asset Healthcare Fund. Both the funds have a well-diversified portfolio with optimal allocations across the pharma themes.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)

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