Pharma, healthcare funds are in recovery mode. Should you enter them now?
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar pointed out that US drug-pricing policy and high concentration add risk, said these funds suit investors who understand sector cycles, and suggested limiting total sector exposure to below 10%.
What Abhishek Kumar said
What are the main risks in pharma and healthcare sector funds?
Two risks stand out for me. First, companies that rely on exports to the US are affected by policy changes there; evolving drug-pricing rules, such as the Medicare pricing reset, can hurt export-oriented businesses. Second, these funds carry high concentration risk: when pharma and healthcare stocks underperform, the fund manager has no option to diversify into other sectors.
Who should consider investing in a pharma or healthcare fund?
I see these funds as suitable for investors who understand how sectoral cycles work and who are able to sit through sharp ups and downs in value, because sector bets carry this kind of volatility by nature. Novice investors, in my view, should keep away from sectoral bets such as pharma funds altogether.
I already hold a pharma fund. Should I add more after the recent recovery?
I would add to an existing holding only if your total exposure to the sector stays below 10%. If your allocation has already gone past that level, I suggest booking partial profits to bring it back down. In other words, the overall weight of the sector in your portfolio, counted across all the funds you hold, should decide whether you add more.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on mutual funds
After a weak 2025, pharma and healthcare sector funds have recovered. The article sets out what fund managers see for the sector, the headwinds and risks such as US regulation and pricing policy, who these sector funds suit, and how new and existing investors might approach them.
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Pharma, healthcare funds are in recovery mode. Should you enter them now?