Pharma sector funds continue to bleed. Is it time to quit?

The pharma sector funds have been bleeding for more than a year now. The category returned -14.53 per cent in one year, -3.91 per cent in three months and -9.59 per cent in one month. Many investors are anxious about their investment in pharma funds and what future holds for these investments.

Sonam Udasi, fund manager, Tata India Pharma & HealthCare Fund, believes the pharma sector does not look attractive in the near term but he believes the sector would surely bounce back in the long run. “A sector goes through its ups and downs. A consumer-focussed sector like pharma will never totally lose its sheen in an emerging market like India,” Udasi says.

The pharma sector has been impacted badly by both domestic and global factors. Some major Indian pharma giants have seen hurdles in business by the US Food and Drugs Association (FDA). Indian companies have been facing hurdles to export drugs to the US and the regulations are expected to get tighter under Donald Trump.

However, experts believe that mutual fund investors who have invested in pharma sector funds should not get out of their schemes now. “The sector is going through a phase and it will come back. The point is that retail investors shouldn’t be having more than 5-10 per cent allocation to any sector fund. If you have a small allocation, you don’t need to worry. Stay invested,” says Puneet Oberoi, Founder, Excellent Investment Advisors.

Sonam Udasi believes there are still companies to look for, majorly the smaller companies. “The big companies might do well but not very soon. The valuations are attractive and the sector has some really good bets in some smaller companies,” he says.

Udasi believes that investors who can wait should invest in pharma funds now. “Come in with a long-term investment horizon. We might see a turn-around in the coming two to three years,” he adds.

Even Oberoi believes that new investors can consider starting investing in the pharma sector funds if they are familiar with the sector and have the time to wait. “This is a good time to invest for those who have a fair knowledge of the sector. The sector is at its lowest and will only rise from here,” says Oberoi.