Return Tracker. All’s not well with pharma funds

After a stellar rally which lasted for over seven years, pharma stocks took a breather last year. Concerns over regulatory action by the US Food and Drug Administration on Indian drug makers, citing quality lapses, caused nervousness among investors.

Also, the uncertainty regarding US elections and concerns regarding change in government policies had a rub-off on the stock prices of Indian drugmakers. Over the past year, the BSE Healthcare Index has shed over 7 per cent while the BSE Sensex gained about a per cent. Pharma funds that invest their corpus in drugmakers have seen their NAV decline by 5-7 per cent in the last 12 months.

SBI Pharma Fund, which topped the list consistently for the last several years, slipped to the bottom-most rank. In the last three months, the fund’s NAV has fallen by over 3 per cent.

This is higher than the over 2 per cent fall in its benchmark, the S&P BSE Healthcare Index. And this, in turn, has impacted the scheme’s one-year returns as well — which is down nearly 5 per cent, compared with a 3.5 per cent fall in the benchmark.

The steep fall in the prices of stocks such as Shasun Strides, Sanofi, and Indoco Remedies besides biggies Sun Pharma and Lupin was responsible for the slack performance. On the other hand, the performance of Reliance Pharma Fund has improved significantly in the last three months and it ranks first among the pharma fund pack.

The fund’s NAV remained largely flat in the last three months even as the healthcare Index fell over 2 per cent. The NAVs of other pharma funds — UTI Pharma and Healthcare Fund and Tata India Pharma and Healthcare Fund — also shed 2-3 per cent during this period. The resilient performance by Reliance Pharma Fund was on account of a sharp rally in stocks such as IPCA Laboratories, Cadila Healthcare, Biocon and Healthcare Global Enterprises that gained in excess of 25 per cent. Over a one-year time frame, the fund declined by a little over a per cent, making it the top performer during this time frame.

UTI Pharma and Healthcare ranked second both on three-month and one-year basis, next only to Reliance Pharma Fund. Stocks such as Piramal Enterprises, Biocon, Shilpa Medicare, Syngene International and Dishman helped performance.

Tata Pharma and Healthcare Fund, launched December 2015, ranked third on a three-month basis. The fund’s decision to add Dishman Pharma, Syngene International and IPCA Laboratories helped it tide over volatility.