Returns Tracker. Pharma stocks pause for breath

After the splendid rally witnessed over the last three years, pharma stocks have taken a breather now.

The BSE Healthcare Index has shed almost 11 per cent in the last one month, higher than the 7 per cent fall in Nifty.

Even as pharma and healthcare funds have managed to contain the downside over the past month, two out of the three funds have lagged their benchmark across one, three and five-year time periods.

Among the three pharma and healthcare funds, SBI Pharma Fund has held on to its numero uno position consistently over the past two-three years, and has been the only fund to deliver benchmark beating returns across all timeframes. Not only did the fund outdo peers — UTI Pharma and Healthcare Fund and Reliance Pharma Fund — on an absolute return basis, but it has also been more consistent than its peers over the last several years.

SBI Pharma Fund has been able to beat its benchmark, the BSE Healthcare Index, almost 68 per cent of the time in the last five years, even as other pharma funds managed to beat their benchmark barely 40 per cent of the time.

The fund’s stock picks in the small and mid-cap space, such as Strides Arcolab, Natco Pharma, Indoco Remedies and Sequent Scientific, have more than doubled in the past year and have lifted its performance.

Likewise, the decision to exit underperformers such as Unichem Laboratories and IPCA Laboratories also helped the fund race ahead of its benchmark.

Though UTI Pharma and Healthcare Fund’s returns were lower than its benchmark, the CNX Healthcare Index, across one, three and five-year periods, its performance has improved in the last six months. Increasing exposure to small-cap stocks such as Strides Arcolab, Shasun Pharma and Sun Pharma Advanced Research and adding Natco Pharma and Shilpa Medicare to its portfolio provided a leg-up to the scheme’s performance.

Reliance Pharma continued its mid-quartile performance in the past year too.

The recent correction in pharma stocks has dragged the fund’s returns, which trailed its benchmark, BSE Healthcare Index, its peer, SBI Pharma Fund, across one, three and five-year periods.

While adding stocks such as Indoco Remedies, Lupin, and Cipla to its portfolio aided performance, exposure to underperformers such as IPCA Labs ate into the fund’s gains.