Limit exposure to pharma and healthcare funds to 5% of equity portfolio

Improving US generic market outlook is driving the current rebound, but brace for periodic drawdowns

After an 8.6 per cent average decline in 2022, pharma and healthcare funds have rebounded this year. They are up 19 per cent on average year-to-date.

Their underperformance in 2022 can be attributed to a range of factors. “The key reasons were the significant price erosion in the United States (US) generic market and a surge in raw material costs that eroded the margins of pharma companies,” says Chirag Dagli, fund manager, DSP Mutual Fund.

According to Dharmesh Kakkad, fund manager, ICICI Prudential Mutual Fund, the delay in approvals for complex generics also played a part.

“It affected companies whose