Pharma Funds: Defensive bet for your portfolio

With deteriorating global and domestic investment climate, investors are looking out for defensive bets. And Pharma funds are one such category that is finding favour with them. The largest pharma scheme, Reliance Pharma Fund, has seen its AUM move from Rs 287 crores in February 2010 to Rs 564 crores in March 2012.

There are a couple of things in favour of the pharma sector now. "Since pharma sector on the whole is a net exporter, and hence it benefits marginally due to the rupee depreciation," says Sarabjit Kaur Nangra, VP (Research), Angel Broking. She further adds that, earnings growth for the sector is expected to be steady and most companies have been delivering a growth of 18-20%, making them good investment bets.

Pharma funds as a category have outperformed the broader indices over the one year ending May 30. As per data from Value Research, a mutual fund tracking firm, pharma funds have given a return of 3.6% in the last year. During this period, Nifty, which represents the broader market, was down by 8.9%.

There are three funds in the pharma space -- Reliance pharma Fund, SBI Magnum Pharma and UTI Healthcare and Pharma."Given the uncertain global environment and uncertain local environment, investors, conservative investors could allocate some portion of their equity portfolio to defensive sectors like pharma," says Amar Ranu, Senior manager - third party products-research, Motilal Oswal Securities.