Pharma and Healthcare - India’s Healthcare Prowess presents an Investment Opportunity

‘Health is wealth’ is one thought that resonates with the world’s population of over 7 billion. And healthcare is among the top priorities that any government/country has. Recently, India, too launched Pradhan Mantri Jan Arogya Yojana (PM-JAY), wherein it provided a cover of Rs 5 lakh per family per year to its citizens for hospital care.

Further, India has been at the forefront when it comes to providing health supplies, not just to its citizens but also to the world at large for e.g. Covid vaccine. Additionally, with 2nd highest ANDA (Abbreviated New Drug Application) approvals since 2005 and a strong and growing pool of Pharma R&D personnel (scientists, graduates), India has taken a huge stride in the pharma and healthcare space over the last two decades.

Pharma and Healthcare theme is a play on domestic spend and export growth, aided by India’s manufacturing leadership

The Theme offers wide spectrum of opportunities

While domestic formulations, diagnostics, hospitals and retail pharmacy are more of structural growth stories, exposure to generics, biosimilars offers cyclical/tactical opportunities. Drug shortage in the US tends to be cyclical and is currently trending high. Historically, it has been observed that drug shortages have resulted in an improved pricing environment. Further, ~USD 98 bn worth of small molecules will go off-patent in next 5-years vs ~USD 38 bn in preceding 5-years, providing a big opportunity for Indian pharma companies.

With certain sub-segments being structural in nature and given the improvement in pricing environment for US generics, this can be an opportune time to consider investing in this theme.

HDFC Pharma and Healthcare Fund, which invests at least 80% of its Net Assets in equity and equity related instruments of Pharma and healthcare, may be considered as a viable investment avenue for investors looking to invest in this space. NFO runs from 14th Sep 2023 to 28th Sep 2023.

Investing in thematic funds has its own pros and cons and investors need to be mindful of them. Relatively higher concentration in certain sectors makes thematic funds relatively riskier as compared to diversified funds. On the other hand, low overlap of themes with broader indices provides diversification benefit to investors. Consequently, Investors need to consult a financial advisor and invest in thematic schemes, as per their risk appetite.

The Scheme being sectoral in nature carries higher risks versus diversified equity mutual funds on account of concentration and sector specific risks

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