Predictions for 2025: Pharma and healthcare mutual funds have offered the highest average return of around 38.05% in 2024 (from January 1, 2024 to December 3, 2024), as per an analysis by ET Mutual Funds. The category had 13 schemes and HDFC Pharma and Healthcare Fund gave the highest return of around 46.16%, followed by ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund which gave 43.02% return in the mentioned period. India pharma companies’ progress in complex generics, stable US pricing and steady sales growth in India led to fund houses buying into stocks like Alembic Pharma, Divis Labs, Glenmark, Medplus, Orchid and Sanofi Consumer, ET has reported a few days ago. Fund houses used the weakness in the mid- and small-cap space to accumulate select pharma stocks where valuations are reasonable and companies have potential for growth.
India’s pharma sector has been in an upswing in recent times. The government wants to make India a reliable “pharmacy of the world”. “The PLI (production-linked incentives) scheme in the pharma and medical-tech sectors has been a roaring success,” Arunish Chawla, Secretary of the Department of Pharmaceuticals, has said. “50 greenfield plants in the pharma and medical-tech sectors have started operating and 50 more are in the pipeline. We have increased our exports and grown double year-on-year.” With the government revving up support for drug development in India, as many as 16 blockbuster molecules targeted for a wide range of therapeutic areas, including cancer, diabetes, HIV and tuberculosis, are in the pipeline to be produced in India, Department of Pharmaceuticals, as per Chawla.
How will the pharma sector fare in 2025?
Amid market volatility and record withdrawals by the FIIs, pharma sector looks promising. While corporate results for India Inc. in Q2 fell below expectations, Nifty Pharma index has posted solid 14.30% YoY revenue growth and 23.59% YoY profit growth, as per Jimeet Modi, CEO, Samco Ventures. “The market cap of Nifty Pharma index compared to Nifty 500 index is rising above its median level, reflecting the sector’s strong momentum and outperformance relative to the market at large. In 2015, the Pharma index’s weightage had reached the top level of around 7%. The present weightage at around 4.26% is far below the top level and provides ample room for it to rise,” Modi has written in ET. “The P/E and P/B ratios of the Nifty Pharma index are currently around their historical median levels, providing a sense of valuation comfort.”
