Reliance Pharma Fund-A Pill For Good Health

Of late, the Indian markets seem to have caught the cold and viral fever, having been infected by its weak global peers. With no triggers in sight, the markets appear to have no choice but to follow their global counterparts. The domestic markets are facing resistance and uncertainty from the European nations owing to its debt worries, concerns about a bubble burst and policy tightening in China, worrisome data from the US and the aggravation of the geo-political situation in the South and North Korea.

In such a period of epidemic (testing period for markets), it’s better to take some precautions and take cover under the umbrella of pharma funds to stay in good health. Pharmaceuticals as a sector can be considered a defensive sector and one of the best bets during any bearish period. The funds with the pharma theme in the bearish period of 2008 have proved their mettle where they (category average) restricted their losses to 34.81 per cent, wherein at the same time the Nifty returns and the diversified fund category NAVs fell by 51.79 and 55.51 per cent respectively. 

During the 2009 market recovery phase, pharma funds outperformed the diversified category as well as the Nifty returns by 1,151 and 2,015 basis points respectively. And during their lifespan, the funds have not only outdone, but also trampled the benchmark (BSE HC) returns. Coming to this fund, it has consistently been a chart-topper since its early days and has managed to outpace its category in CY08 and CY09 by 81 and 2,269 basis points respectively. The credit for such a consistent performance goes to the doctor (here I mean the fund manager) of this fund who has taken the right calls on its portfolio. 

Talking about the fund manager, Sailesh Raj Bhan has been managing this fund since March 2005 and has continued to provide good yields, guiding the fund properly through both good and bad times. He also manages funds like Reliance ELSS Series 1, Equity Opportunities and Media and Entertainment that have beaten their category returns by fairly high margins. Being a sector-specific fund and that too a pharma fund, it has a fairly limited horizon for stock selection. As a result, the fund floats 19 stocks in its concentrated portfolio wherein the top ten stocks contribute almost 70 per cent of its net assets. 

The fund has invested over 94 per cent in the stock market wherein the equity portfolio is largely invested in the mid-cap space. It provides a good mix of defence (pharma sector allocation) with aggression (mid-cap allocation) at the same time. Being a thematic fund, it’s important to enter and exit the fund at the right price. You can enter it through a SIP and not time the market, though we would suggest that you exit such a fund at its high to make the most out of it before the theme loses steam. Looking at the positive outlook for pharmaceutical companies and this fund’s decent track record, investors with a long-term investment horizon can take exposure to this fund.