ETF: A best option to enter into the Pharma market


The Healthcare industry proved to be the prime driver of the Indian economy since the outbreak of the pandemic. As per Niti Aayog’s reports, healthcare has emerged as one of the largest sectors in the economy, both in terms of revenue and employment. Covid taught the importance of health and healthcare services to the people. The Healthcare industry has been in priority since the first wave hit the country. After the second wave, healthcare will be a priority not only from the administrative point of view but also for the public as a whole in coming years.   

Taking the healthcare sector from the stock market perspective, this sector has underperformed for many years particularly between 2016 and 2019. Covid 19 has turbocharged healthcare stocks. Its Index jumped to 57.9 per cent in the year 2020 compared to a 16.10 per cent jump in Nifty50 Index. Nifty Healthcare Index comprised of 20 fastest-growing Pharma companies listed in NSE. The top five companies are Sun Pharmaceutical Industries, Dr Reddy’s Laboratories, Divi’s Laboratories, Cipla and Apollo Hospitals Enterprise. To know the complete list of pharma companies listed in NSE click here.  

Now, the question may arise that the investor who missed out on the pharma stocks hitherto, how can they participate in days ahead? The investor who does not have much knowledge about the stock market, mutual funds are the best options for them to move ahead. Today, many types of healthcare funds are available in the market, some active and others passive. In Active investments, managers use data and pieces of information to analyse the trends of the market and then suggest to invest, while in Passive investments, managers match the returns with index benchmark. These are less expensive as these are based only on the characteristics of the Index.  

For those looking to get exposure to healthcare as space now, Exchange Trade Funds [ETF] offers an opportunity. ETF invests money in a basket of stocks of companies that provide medical services, develop medical equipment and drugs or offer medical insurances to people. The interesting feature of ETF is that these funds are available on the exchange that means they can be bought or sold at any time during trading hours. ETF are passively managed funds and the biggest advantage of this fund is that a person can get these funds in real-time NAV (Net Asset Value). NAV is the Net value of the fund (Total Assets – Liabilities) divided by a Total number of shares of fund outstanding. This ETF has a few management accountabilities and the management fee is also low.  

Exchange Trade Funds are managed by investment trade professionals, so they are less risky. This fund has a huge potential to grow in the investment market. While past performance does not guarantee its future performances, but there are solid reasons to put faith and some level of risk on these funds. 

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