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Risk aversion and consequent flight of capital to defensive sectors significantly aided the out-performance of the pharma sector in the last five years. The BSE Healthcare Index delivered 16-17 per cent annually over the past five years. On a one-year basis, the BSE Healthcare index clocked 23 per cent gains compared with a meagre 9 per cent rise in the Nifty.
Pharma funds have seen a divergence in performance. . On a one-year basis, only SBI Pharma outpaced its benchmark, while over a five-year period, Reliance Pharma and UTI Pharma & Healthcare funds outperformed. On a three-year basis, too only SBI Pharma did better than the BSE Healthcare.
Portfolio moves
Higher exposure to stocks such as Zydus Cadila, Divis Labs and IPCA Labs gave a leg-up to SBI Pharma’s one-year performance. IPCA Labs was among the best performers in 2012 after the US drug regulator approved its Indore SEZ facility. Similarly, re-approval of Cadila’s manufacturing facility (at Moraiya near Ahmedabad) came as a shot in the arm for the company.
Selecting the right stocks helped the fund’s three-year performance. For instance, higher allocation to stocks such as Divis Labs, Unichem Labs and IPCA Labs helped this. Also, lower exposure to Opto Circuits aided relatively better performance.
But, UTI Pharma and Healthcare and Reliance Pharma returned gains lower than BSE Healthcare on a one-and three-year basis. Being underweight in star performers such as Sun Pharma and Glenmark Pharma impacted their one-year performance. For Sun and Glenmark, robust sales in the US helped post strong growth in revenues and profits.
Reliance Pharma fund topped the list on a five-year basis. The fund delivered 24.6 per cent annualised returns in the last five years, higher than the 18 per cent gain recorded by BSE Healthcare Index. In addition to Pharma names such as Torrent Pharma, Indoco Remedies and Sanofi India, exposure to consumer company Zydus Wellness helped the fund beat its benchmark’s returns.
On a five-year basis, SBI Pharma and UTI Pharma and Healthcare lagged the benchmark returns. Higher allocation to stocks such as Vimta Labs and Dishman Pharma did not help the fund performance.
SBI Pharma seems to be the most consistent performer of the pack, over the past three years.
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