Top Pharma Mutual Funds in India 2025: Returns Calculation, Factors to Consider & More
In an era where the pharmaceutical industry is witnessing unprecedented growth and innovation, investing in Pharma Mutual Funds has become an intriguing avenue for investors seeking opportunities in the healthcare sector. Backed by robust R&D capabilities and a massive pool of skilled personnel, India’s pharmaceutical industry has positioned itself as a promising hub for investment. With the objective of tapping into the nation’s growing healthcare market, numerous investors are directing their focus towards pharma sector funds. But before that let’s understand what pharmaceutical mutual funds are and their benefits.
What are Pharma Mutual Funds?
Sectoral mutual funds are equity funds that pool capital from multiple investors to invest specifically in the pharmaceutical and healthcare sectors. These funds allocate resources across a diversified portfolio of pharmaceutical companies, biotechnology firms, healthcare service providers, and related industries.
By investing in pharma sector mutual funds, investors gain exposure to the growth potential of the pharmaceutical sector. Research and development, drug approvals, and the overall expansion of healthcare services are some of the factors.
List of Best Pharma Mutual Funds in India 2025
Here is a list of the best pharma sector mutual funds that you can consider investing in.
| Name | AUM (Rs. in cr.) | Expense Ratio (%) | CAGR 3Y (%) |
|---|---|---|---|
| SBI Healthcare Opp Fund | 3,628.03 | 0.89 | 25.36 |
| ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund | 5,320.29 | 1.08 | 25.02 |
| DSP Healthcare Fund | 3,339.79 | 0.57 | 23.27 |
| Tata India Pharma & Healthcare Fund | 1,287.45 | 0.68 | 22.25 |
| UTI Healthcare Fund | 1,150.43 | 1.20 | 21.63 |
| ITI Pharma & Healthcare Fund | 230.79 | 0.47 | 21.34 |
| Nippon India Pharma Fund | 8,160.74 | 0.91 | 20.65 |
| Mirae Asset Healthcare Fund | 2,863.52 | 0.49 | 19.88 |
| Aditya Birla SL Pharma & Healthcare Fund | 890.33 | 0.91 | 19.34 |
| LIC MF Healthcare Fund | 86.26 | 1.22 | 18.55 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the top pharma mutual funds in India in the list is from 6th February 2025. The data present in the list of the best pharma funds is taken from Tickertape Mutual Fund Screener.
Top Pharma Mutual Funds Overview
Let’s discuss the pharma and healthcare mutual funds in detail.
SBI Healthcare Opportunities Fund
SBI Healthcare Opportunities Fund is a sectoral mutual fund that focuses on the pharmaceutical and healthcare industry. Launched on 14th July 1999, the fund invests in companies engaged in healthcare services, biotechnology, and pharmaceuticals, offering investors exposure to the growing healthcare sector.
As of 6th February 2025, the fund has an asset under management (AUM) of Rs. 3,628.03 cr. with an expense ratio of 0.89%. It has delivered a compound annual growth rate (CAGR) of 25.36% over 3 years.
ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund
ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund is a sectoral equity fund that invests in pharmaceutical, healthcare, and diagnostic companies. Launched on 15th July 2018, the fund aims to capitalise on the growing demand for healthcare services and medical advancements.
As of 6th February 2025, the fund has an AUM of Rs. 5,320.29 cr. with an expense ratio of 1.08%. It has generated a CAGR of 25.02% over 3 years.
DSP Healthcare Fund
DSP Healthcare Fund is a sector-focused mutual fund that invests in healthcare and pharmaceutical companies. Launched on 29th November 2018, the fund aims to benefit from innovations and growth in the global and Indian healthcare sectors.
As of 6th February 2025, the fund has an AUM of Rs. 3,339.79 cr. with an expense ratio of 0.57%. It has delivered a CAGR of 23.27% over 3 years.
Tata India Pharma & Healthcare Fund
Tata India Pharma & Healthcare Fund is a healthcare-focused mutual fund that invests in pharmaceutical, biotechnology, and healthcare service providers. Launched on 28th December 2015, the fund aims to capitalise on opportunities in India’s expanding healthcare industry.
As of 6th February 2025, the fund has an AUM of Rs. 1,287.45 cr. with an expense ratio of 0.68%. It has recorded a CAGR of 22.25% over 3 years.
UTI Healthcare Fund
UTI Healthcare Fund is a sectoral mutual fund that invests in companies across the healthcare and pharmaceutical industries. Launched on 28th June 1999, the fund seeks to capture long-term growth opportunities in the healthcare sector.
As of 6th February 2025, the fund has an AUM of Rs. 1,150.43 cr. with an expense ratio of 1.20%. It has delivered a CAGR of 21.63% over 3 years.
ITI Pharma & Healthcare Fund
ITI Pharma & Healthcare Fund is a sector-specific equity mutual fund that invests in companies operating in pharmaceuticals, diagnostics, and healthcare services. Launched on 7th July 2021, the fund focuses on opportunities within India’s expanding healthcare industry.
As of 6th February 2025, the fund has an AUM of Rs. 230.79 cr. with an expense ratio of 0.47%. It has generated a CAGR of 21.34% over 3 years.
Nippon India Pharma Fund
Nippon India Pharma Fund is a sectoral mutual fund that invests in pharmaceutical and healthcare companies. Launched on 5th June 2004, the fund aims to provide long-term capital appreciation by leveraging growth opportunities in the healthcare sector.
As of 6th February 2025, the fund has an AUM of Rs. 8,160.74 cr. with an expense ratio of 0.91%. It has delivered a CAGR of 20.65% over 3 years.
Mirae Asset Healthcare Fund
Mirae Asset Healthcare Fund is a sectoral mutual fund that invests in pharmaceutical, healthcare, and biotechnology companies. Launched on 11th July 2018, the fund aims to benefit from the increasing demand for healthcare services and medical advancements.
As of 6th February 2025, the fund has an AUM of Rs. 2,863.52 cr. with an expense ratio of 0.49%. It has recorded a CAGR of 19.88% over 3 years.
Aditya Birla Sun Life Pharma & Healthcare Fund
Aditya Birla Sun Life Pharma & Healthcare Fund is a healthcare-focused mutual fund investing in companies engaged in pharmaceuticals, diagnostics, and healthcare services. Launched on 11th May 2018, the fund seeks to provide long-term capital growth.
As of 6th February 2025, the fund has an AUM of Rs. 890.33 cr. with an expense ratio of 0.91%. It has delivered a CAGR of 19.34% over 3 years.
LIC MF Healthcare Fund
LIC MF Healthcare Fund is a sectoral mutual fund focused on the pharmaceutical and healthcare industry. Launched on 22nd December 2022, the fund aims to generate capital appreciation by investing in companies engaged in healthcare services and medical research.
As of 6th February 2025, the fund has an AUM of Rs. 86.26 cr. with an expense ratio of 1.22%. It has recorded a CAGR of 18.55% over 3 years.
How Do Nifty Pharma Mutual Fund Work?
Investors with shared investment goals use mutual funds, which offer a platform for allocating their funds to various schemes. Among these, sectoral funds stand out as a specific type of equity mutual fund that focuses on companies within a particular industry. For instance, an IT fund concentrates on IT companies, while a banking fund directs investments towards banks. At last, a pharma fund centres on pharmaceutical and healthcare funds in India.
As sectoral funds, pharma mutual funds exclusively invest in the pharmaceutical industry, even during market downturns. This specialisation can expose investors to significant losses until market conditions stabilise. However, the concentrated portfolios of these funds also present an opportunity for substantial gains when the sector performs well.
Operating like other mutual fund schemes, top pharma mutual funds adhere to standard procedures. When a fund house introduces a new scheme, they gather funds from investors and invest in top pharma shares and other companies that involve biotechnology firms, hospital management entities, research facilities, etc. In compliance with SEBI regulations, at least 80% of the total assets of these funds must be invested in the pharma sector.
Features of Best Performing Pharma Mutual Funds
Let’s have a look at the features of best performing pharma mutual funds.
- Focused Industry Exposure: The best-performing pharma mutual funds exhibit a focused approach by concentrating their investments primarily in pharmaceutical and healthcare companies. This targeted exposure allows investors to capitalise on the potential growth within the sector.
- Diversified Portfolio within Pharma: Successful pharma mutual funds strategically diversify their portfolios within the pharmaceutical industry. This includes investments in a variety of segments such as pharmaceutical manufacturing, biotechnology, healthcare services, and research facilities, mitigating risks associated with a specific niche.
- Thorough Research and Analysis: Top pharma mutual funds are characterised by meticulous research and analysis conducted by fund managers. In-depth scrutiny of pharmaceutical companies, market trends, and regulatory changes helps these funds make informed investment decisions, contributing to their overall performance.
- Responsive Portfolio Management: The ability to adapt and respond to market dynamics sets the best-performing pharma mutual funds apart. Fund managers actively monitor the performance of securities in their portfolios and make timely adjustments, replacing underperforming assets to maximise returns for investors.
- Compliance with SEBI Regulations: The regulatory compliance of the fund is a key feature of top pharma mutual funds. Adhering to SEBI regulations, these funds ensure that at least 80% of their total assets are invested in the pharmaceutical sector, providing transparency and aligning with industry standards.
Who Should Invest in Pharmaceutical Mutual Funds?
Given their emphasis on investing in equities of prominent companies, thematic funds of this nature may carry a level of risk. Individuals with a high-risk tolerance may seek to maximise returns and may find the best pharma funds. While these funds typically outperform benchmarks during favourable market conditions, it’s essential to acknowledge that downturns in the sector can amplify losses.
Financial advisors often recommend long-term investment in a specific pharma fund, but caution is advised for risk-averse investors, who should consider alternative options. Thematic mutual funds, such as those focusing on the pharma sector, commonly allocate their investments to the best pharma stock in India that largely includes large cap companies, resulting in elevated credit risk. The sector’s positive performance aligns with the potential for good returns, but downturns may incur significant losses.
Factors to Consider Before Investing in Pharmaceutical Mutual Funds
Before venturing into pharmaceutical mutual funds, it’s crucial to assess several factors. Here is a list of factors:
- Deciding About Investing in Pharma Sector Mutual Funds: Pharma funds must allocate a minimum of 80% of their total assets to the specified as the best sector, adhering to SEBI regulations. It’s crucial to note that individuals with a high-risk tolerance, especially aggressive investors, are recommended to invest in pharma funds.
- Investment Horizon: Opt for pharma funds if you have a long-term investment horizon.
- Strategic SIP Plans: Explore the option of utilising a systematic investment plan (SIP) for pharma funds. Therefore, the best Pharma MF SIPs enable a phased approach to investing in the pharmaceutical sector, promoting a disciplined and gradual investment strategy.
- Portfolio Alignment: While large-cap-oriented portfolios typically allocate 3% to 5% to the pharma sector, mid-cap and multi-cap funds may offer more substantial exposure to pharmaceutical and healthcare segments.
How to Invest in Pharmaceutical Mutual Funds?
Investing in pharma mutual funds can be done through various avenues. One common avenue is through online investment platforms or brokerage accounts, where investors can explore and select pharma-focused mutual funds. Financial institutions such as banks and dedicated asset management companies also offer these funds, allowing investors to directly purchase units.
Additionally, consulting with a financial advisor can provide personalised guidance on selecting suitable pharma mutual funds based on individual investment goals and risk tolerance. Investors may also consider investing through systematic investment plans (SIPs) offered by mutual fund houses, enabling periodic investments in pharma funds. Thus, keep in mind that thorough research on fund performance, expense ratios, and overall market conditions is crucial before making any investment decisions.
Risks Involved While Investing in Pharma Mutual Funds
Investing in pharma mutual funds can offer promising returns, but it also comes with its own set of risks. Here are some key concerns to consider:
- Clinical Trial Failures: New drugs face a high risk of failure during clinical trials, significantly impacting the performance of companies and the fund’s value.
- Regulatory Hurdles: Drug approvals can be delayed or denied by regulatory bodies. Therefore, this causes setbacks for pharmaceutical companies and potential losses for investors.
- Patent Expirations: The expiry of key patents can lead to price competition and reduced revenue for pharmaceutical companies. This may affect the fund’s value.
- Macroeconomic Factors: Economic downturns and currency fluctuations can impact the demand for pharmaceuticals funds, leading to market volatility and potential losses.
- Competition: The pharmaceutical industry is highly competitive, with new entrants and generic drugs constantly challenging established players.
Benefits of Investing in Top Pharma Mutual Funds
Here is a list of advantages one can expect from investing in pharma and healthcare funds.
- Potential for High Returns: Given their high-risk-high-reward nature, the best pharma sector mutual funds can yield significant returns during bullish market phases. Investing in a growing sector may further amplify returns, making these funds suitable for wealth multiplication within an approximate 3-year time horizon.
- Sectoral Impact on Growth: The best pharma MF, being sectoral, contributes to the development of the pharmaceutical sector and the nation’s economy. However, their performance can be influenced by government policies, emphasising the importance of strategic entry and exit points.
- Tax Implications: The tax structure for pharma funds mirrors that of other equity funds. No taxation is levied on long-term gains below ₹1 lakh, but amounts exceeding this threshold face a 10% tax. Equity funds do not benefit from indexation. 15% tax rate on short-term gains.
How to Choose Best Pharma Mutual Funds for Investing?
Picking the best pharma mutual fund for you is like tailoring a suit – it needs to fit your goals and risk tolerance. Here’s how:
- Know Your Style: Are you a long-term growth seeker, a dividend hunter, or somewhere in between? Choose a fund that aligns with your vision. Look for large-cap funds for stability, small-cap for potential growth spurts, or sector-specific ones to target specific areas like biotech.
- Look Under the Hood: Dive into the health care mutual funds’ performance. Check how it fared over different timeframes, compared to benchmarks, and against similar funds. A good track record doesn’t guarantee the future, but it paints a picture of the fund’s competence.
- Meet the Manager: The captain steers the ship! Research the fund manager’s experience, qualifications, and investment philosophy. Do their values resonate with yours? Trusting their expertise is key.
- Cost Matters: Expense ratios (management fees) eat into your returns. Compare fees across similar funds and choose one that offers good value for the service.
- Don’t Put all your Eggs in One Basket: Diversify! Investing in a mix of pharma funds and other asset classes helps spread your risk and potentially smooth out bumpy rides.
Remember: No one size fits all. Take your time, research thoroughly, and choose a fund that complements your financial goals and personality. And if you’re still unsure, consulting a financial advisor for personalised guidance can be a wise step.
What are the Returns on Pharma Mutual Funds & How are they Calculated?
The Indian Pharmaceutical sector ranks as the world’s third-largest by volume and 14th-largest by value. It contributes to 3.5% of global medication exports and currently makes up 1.72% of the country’s GDP, projected to grow at a rate of 10% to 12% annually. Additionally, India boasts the second-highest number of FDA-approved plants globally. Thus, it is positioned as the leading supplier of generic pharmaceutical medicines worldwide. Notably, manufacturing costs in India are 33% lower than in Western markets.
However, as per the returns, the pharma mutual funds have potentially delivered 22.33% p.a. returns in the last 5 years. Therefore, their 3 and 10 year annualised returns are 15.66% and 16.28% p.a.
Returns on pharma mutual funds can be calculated using two main methods: Absolute Returns and Compounded Annual Growth Rate (CAGR).
Absolute Returns
Absolute returns measure the actual percentage change in the Net Asset Value (NAV) of the mutual fund over a specific period. The formula for absolute returns is:
Absolute Returns= [(Ending NAV−Beginning NAV) / Beginning NAV] ×100
This formula gives you the percentage increase or decrease in the NAV over the chosen time frame.
Compounded Annual Growth Rate (CAGR)
CAGR provides a smoothed annual rate of return, taking into account the compounding effect over multiple years. The formula for CAGR is:
CAGR = (Ending NAVBeginning NAV) 1/Number of Years−1
CAGR is particularly useful for assessing the annualized growth rate over an investment horizon, providing a more accurate representation of returns over time.
As always, investors must do their own research and/or consult their financial advisor before investing.
Taxation on Pharma Sector Mutual Funds as per the Union Budget 2024-25
The taxation on capital gains from your mutual fund investments is based on their holding periods and asset allocation. A few revisions were made to the tax rates, depending on their types, in the Union Budget 2024-25. It may be important to learn about these revisions when considering pharmaceutical mutual funds. These changes include:
Equity Mutual Funds
- Short-Term Capital Gains (STCG): The gains from equity mutual funds held for less than 12 months are now taxed at 20%. This is an increase from the previous tax rate of 15%.
- Long-Term Capital Gains (LTCG): For equity mutual funds held for over a period of over 12 months, gains are classified as long-term capital gains. The new budget introduces these key changes to the LTCG:
- Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
- Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
- Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.
Indexation was a method that allowed investors to adjust the purchase price of assets for inflation. This adjustment reduced taxable profits when selling assets like property or gold. Previously, these long-term capital gains were taxed at 20%. The new rule imposes a flat 12.5% tax on all long-term capital gains but eliminates any indexation benefits.
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
Debt Mutual Funds
- Short-Term Capital Gains (STCG): If you sell your debt fund units within a period of 36 months, the gains are classified as short-term capital gains. The STCG will be taxed according to your income tax slab rate.
- Long-Term Capital Gains (LTCG): For debt funds held for a period over 36 months, the gains are classified as long-term capital gains. The new budget outlines a few changes on the LTCG for debt funds, including:
- Tax Rate: A flat 12.5% tax rate applies to these gains.
- No Indexation Benefit: The previous benefit of adjusting the purchase price for inflation is removed. Now, the entire gain after three years is taxable at 12.5%.
- Change in Holding Period for Specified Mutual Funds: Previously, debt mutual funds with a holding period of over 36 months were taxed based on the investor’s tax slab, classified as Long-Term Capital Gains (LTCG). Now, for specified mutual funds where over 65% of the investment is in debt, the holding period for taxation has been reduced to over 24 months. These funds will still be taxed according to the investor’s tax slab as either LTCG or STCG.
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 36 months | Taxed according to your income tax slab | Taxed according to your income tax slab |
| Long-Term Capital Gains (LTCG) | More than 36 months | 10% | 12.50% |
Hybrid Mutual Funds
Short-Term Capital Gains (STCG)
The tax on short-term capital gains depends on the fund’s asset allocation when it comes to hybrid mutual funds. Here is a breakdown of STCG tax rates according to their asset allocation in hybrid funds:
- Equity-Oriented Hybrid Funds (more than 65% in equity): The gains from units sold within 12 months are taxed at 20%.
- Debt-Oriented Hybrid Funds (less than 65% in equity): The gains from units sold within three years are taxed according to your income tax slab.
Long-Term Capital Gains (LTCG)
The capital gains tax on hybrid mutual funds that extend the specified period (12 or 36 months) is known as the long-term capital gain tax. The tax treatment under this condition is as follows:
- Equity-Oriented Hybrid Funds: The gains from units held for over a period of 12 months are taxed at 12.5%. The gains up to Rs. 1.25 lakh are tax-free.
- Debt-Oriented Hybrid Funds: The gains from units held for over a period of 36 months are taxed at 12.5% without indexation benefits. This means the entire gain is taxed at this rate, without adjustment for inflation.
| Type of Hybrid Fund | Short-Term Capital Gains (STCG) | Long-Term Capital Gains (LTCG) | Indexation Benefit |
| Equity-Oriented Hybrid Funds | 20% for holdings less than 1 year | 12.5% for holdings over 1 year, with gains up to Rs. 1.25 lakh tax-free | Not available |
| Debt-Oriented Hybrid Funds | Taxed as per income tax slab for holdings less than 3 years | 12.5% for holdings over 3 years | Not available |
Note: Mutual fund schemes where neither the equity nor debt orientation exceeds 65% will now be classified as long-term investments after 24 months. The previous holding period for these funds was 36 months. These will be taxed at the revised LTCG tax rate of 12.5%.
To Wrap It Up…
In conclusion, investing in pharma mutual funds involves careful consideration of the sector’s dynamics, one’s risk tolerance, and the potential for long-term growth. The pharmaceutical mutual fund industry’s resilience and its contribution to healthcare make it an intriguing option for investors seeking exposure to a specialised sector.
Frequently Asked Questions (FAQs) on Pharma Mutual Funds
Since Sectoral-Pharma Mutual Funds are equity funds i.e. they invest in stocks of companies, you need to stay invested for at least 5 years.
These best healthcare mutual funds in India hunt for growth in companies developing or selling drugs, medical devices, and healthcare services, from giants to biotech startups.
On average, pharma sector mutual funds have provided annualized returns of 22.33% over the past 5 years. The annualized returns for the 3-year and 10-year periods stand at 15.66% and 16.28% respectively. Investors should comprehend both the growth potential and challenges confronted by agricultural companies.
Investors holding a large corpus can potentially diversify their portfolio by allocating a portion to sector schemes like Pharma. Therefore, it’s advisable, to invest 5-10% of their portfolio in these schemes. However, it’s important to do your own research and/or consult a financial advisor before investing.
Pharma mutual funds in India generally don’t have lock-in periods, giving you flexibility to redeem your investment anytime.
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