2020 has been a year unlike any we’ve seen in the recent past. With the onset of the COVID-19 pandemic, the financial markets went through an unprecedented bad patch. The resulting lockdown, which was no doubt necessary, imposed several restrictions on regular business operations and forced people to stay indoors, thereby affecting several sectors of the economy adversely. Aviation, retail, realty and automobiles industries were foremost among the sectors that were heavily impacted by the pandemic.
However, while some sectors buckled under the impact of the COVID-19 crisis, a few others took an upswing and thrived during the pandemic. The pharma sector tops the list here, seeing as it emerged as one of the top sectors in 2020 in the context of performance. As cases of COVID-19 rose, the demand for pharmaceutical solutions shot up too. Additionally, with Indian research institutes joining in on the race to develop a vaccine, the impetus for the growth of the pharma sector was further strengthened.
So, given these developments, investors in the country are naturally turning to pharma sector funds to give their investment portfolio a better chance at tapping into the market movements this year. As a retail investor, perhaps you too are weighing in on the question of whether it’s worth taking pharma sector exposure in your portfolio.
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The short answer to that question is yes. It’s certainly likely to be worth it. Let’s get into the details and see why this is true.
Why it’s worth taking pharma sector exposure in your investment portfolio
Investing in pharma sector funds and healthcare funds could pay off for more reasons than one. Here’s why your investment portfolio could benefit from some pharma sector exposure.
Excellent market performance in 2020
-Pharma sector funds and healthcare funds have performed exceptionally well this year, even when several other sectors took a hit.
-Being a defensive investment class in general, the pharma industry thrived despite, or perhaps because of, the pandemic. During the period from March 16, 2020 to April 15, 2020, healthcare funds delivered a category average return of 15.51%.
-By comparison, the broader BSE 500 Index yielded -9.71% over the same period. The YTD returns of pharma sector funds also came in at 10.65%, while BSE 500 delivered -27% YTD returns.
Given this kind of market performance, it goes without saying that your investment portfolio would benefit from exposure to the pharma sector.
The strength of the Indian pharmaceutical industry
Over the past few decades, the Indian pharma industry has grown from strength to strength. Even on a global scale, India’s pharmaceutical industry commands a strong presence. As things stand today, India remains the largest provider of generic drugs in the world, enjoying a 20% market share in the global supply of drugs by volume and a 62% share in the supply of vaccines worldwide. With such an expansive market to cater to, India’s pharma sector holds great promise, thereby making healthcare funds and pharma sector funds a lucrative segment to consider for your investment portfolio.
Rising scope for operations within the country
Shifting focus from the global to the local, India continues to remain a hotbed of opportunities for the pharmaceutical sector and the healthcare industry. For one thing, the number of lifestyle diseases in India is on the rise, with illnesses like diabetes, thyroid problems and hypertension afflicting an increasing number of Indians each year. Data from the GOQii India Fit Report 2020 shows that 62% of its participants fell under the high-risk or borderline high-risk category. These developments indicate that there is great scope and need for the country’s pharmaceutical sector to operate and deal with the state of healthcare on the home ground.
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Government spending in the healthcare sector
The healthcare sector in India also has the government’s backing, with the GOI having taken several measures to strengthen and support the industry over the years. In the most recent Union Budget for 2020-21, the government announced an allocation of Rs. 35,600 crore for nutrition-related programs and Rs. 69,000 crore for the healthcare sector. Over the years, government-backed programs like the Ayushman Bharat National Health Protection Mission, Pradhan Mantri Jan Arogya Yojana (PMJAY) and Mission Indradhanush have been introduced to further provide backing to the pharma and healthcare sector.
Given the strong framework of demand on a national as well as international scale as well as the history of excellent market performance, the pharma sector appears to be promising for investors. Mutual funds that invest in pharma sector stocks and healthcare stocks will no doubt make for a fine addition to your investment portfolio, particularly if you’re looking to add assets that are largely defensive to market movements. Explore Pharma and Healthcare sector funds on Moneyfy now!