Ask ET Mutual Funds: Should I stop SIP in SBI Pharma Fund?

I am investing Rs 5,000 through monthly SIP in SBI Bluechip Fund(G), SBI Pharma Fund(G), Mirae Asset Emerging Bluechip Fund(G), TATA Balanced Fund(G), and Rs 4,000 via monthly SIP in Birla Sunlife Frontline Equity Fund(G), Franklin India Smaller companies Fund(G). These are all long-term investments (10 years). Should I stop the SIP in SBI Pharma fund SIP and start investing in a new multi cap fund?

-- Gajendran Kuppan

Gaurav Monga, Certified Investment Planner, responds:

You are investing in a good diversified mix of mutual fund schemes. SBI Pharma Fund is a sectoral fund that invest in the pharmaceutical space. The sectoral funds are more risky than diversified funds, as their performance is linked to a particular sector. Sectors are also cyclical in nature. Till end of 2015, pharma funds had performed very well. In fact, they were one of the best performing funds. But since then, their performance has dipped due to high valuations of the sector and challenges faced by pharma companies in the US market, which is the biggest market for pharma products.


If you are investing in pharma space purely from an investment point, you can stop further investments in SBI Pharma and start an SIP in ICICI Prudential Multicap Fund, which is a diversified multi cap scheme.

On the other hand, with rising medical inflation and growing lifestyle illnesses, the demand for medicines and treatments is only going to increase at a rapid rate, which is going to benefit the pharma companies. Therefore, by investing in pharma sector you will eventually be participating in the sectoral growth over the long term. More importantly, you can look at creating a medical contingency corpus for self and family that is linked to the growth of the pharmaceutical sector which can beat the medical inflation.


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