Fund of Fortnight

This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.[EasyDNNnews:PaidContentStart]




Reason for recommendation

As the market data reveals, the Nifty Pharma index surged from a low of 11,542.45 to a high of 16,279.10, resulting in impressive absolute returns of 41 per cent over a mere nine-month period. Despite such a massive jump, the pharmaceutical sector valuation is still below its historical median. Hence, this suggests a good opportunity to invest in pharmaceutical funds. Among others, we recommend investing in Nippon India Pharma Fund. As regards its performance, this fund has outperformed its benchmark as well as category average in all the trailing periods. 

Moreover, in terms of calendar year returns, this fund has only once underperformed its category in 2019. With such a strong performance, this fund also manages to give better results considering its risk-reward status. It has outperformed its benchmark and category average on Sharpe and Sortino ratios’ parameters. However, on the risk side, it carries one of the highest risks in the category. Therefore, we can say that this is a high-risk high reward fund. 

Shifting our focus to its portfolio, being a sectoral fund it is obvious that this fund would carry concentration risk. 

In terms of sector allocation, it is concentrated towards pharmaceutical and healthcare. Its top 10 holdings contribute 59 per cent of its assets with top holdings having weightage of around 13 per cent. Its portfolio has stocks like Sun Pharmaceuticals, Lupin, Cipla, Apollo Hospital Enterprises and Dr. Reddy’s Laboratories. This is a sectoral fund and hence it is strictly for aggressive investors who should limit their investment into such funds not beyond 5 per cent. Conservative and moderate risk-takers should avoid investing in such a fund. This fund should be looked at as a tactical opportunity and should be reviewed carefully on a regular basis.

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