The pharma play has been derisked with negligible impact from tariff announcements. Healthcare and diagnostics continue to be supported by rising insurance penetration and demand for private healthcare. The two sectors are at a premium, valuation-wise, especially healthcare which makes stock specific, bottom-up investing a necessity across sectors.

Here we analyse 10+ active pharma and healthcare funds, citing the top and bottom performers in the sector, for investors to take a call on active investing in the sector.

Healthcare vs Nifty

In the last year, the broader Nifty-50 has outperformed (10 per cent returns last one year) the two sector indices, BSE Healthcare (-2 per cent) and Nifty Pharma (0 per cent), convincingly. This could partially be attributed to a large-cap tilt or to the tariff related focus on the sector. It was only in Q2FY26 results discussions in November 25 that companies could spell out that the generics are excluded from tariffs even as innovator medicine is yet to be excluded, an overhang only on Sun Pharma.

In the last five years, the sector performance has been mixed. BSE Healthcare which includes hospitals apart from pharma delivered 100 per cent returns compared to Nifty Pharma’s 75 per cent return or even Nifty-50’s 82 per cent return. The differentiation provided by hospitals which benefited from continuing rise in penetration, demand for better healthcare, improved insurance protection, and robotics-aided higher unit economics fared better than pharma.

Fund performance

We have measured performance based on the average of daily rolling returns across one, three and five years. We also measured index outperformance in percentage points versus BSE Healthcare Index which is the tougher barometer compared to Nifty Pharma Index. The probability of the fund beating the index is measured by the percentage of days beating the index daily across time frames.

The sector has a healthy composition of active choices with 10 funds operating for more than 10 years. The sector rewards active management as evidenced by several funds beating the benchmark BSE Healthcare across one-, three- and five-year timeframes.

As shown in the table, DSP Healthcare, ICICI Pru PHD, Nippon India Pharma are top performing funds measured by the outperformance vs Index. While DSP Healthcare and ICICI Pru have been operating for 7-8 years, Nippon India Pharma fund has more than 20 years of operations and has gone through several cycles in Pharma. Mirae Asset Healthcare, SBI Healthcare and Tata India Pharma have performed above the sector average. UTI Healthcare, Aditya Birla Pharma and LIC Healthcare funds have underperformed the sector average on a five year basis.

Fund composition

Sun Pharma is the largest holding with 9-14 per cent weight across top three funds in November 2025, the latest month available for comparison. The stock has had a modest performance in the past year declining by 4 per cent. The company outlook is pegged to its specialty portfolio as Q2FY26 was the first quarter where specialty overtook generics in the US portfolio. The specialty or innovative portfolio has several programmes under study along with the commercial portfolio which is strong. India and Rest of the World markets continue to do well for Sun and other companies which are investing in both the markets.

Divi’s Labs, representing CDMO segment, continues to gain prominence across funds with weights increasing across three of the top four funds (DSP Healthcare currently has no allocation). Divi’s, Neuland Labs and Laurus Labs have reported significant increase in interest for CDMO projects, and funds are positioned to capture the momentum, but with Divi’s alone in the top-10 holdings.

The other big opportunity for the pharma sector is the semaglutide (leading class for diabetes treatment) patent loss this year across several countries, including the US and Canada. Sun Pharma, Cipla, Torrent, and Aurobindo have reported plans to be in the first and second wave of launches across countries. Dr. Reddy’s has reported launch plans in 87 countries and is seemingly in the forefront of the opportunity. On the other end, ingredients and API maker Divi’s is also gearing up for the large-scale opportunity. The stocks are well represented across the funds as well.

Hospitals and Labs, after several years of stellar run, have now lower weights in fund portfolios. Apollo Hospitals, driven by expansion plans and turnaround in other ventures, is well represented across funds.

Investors can consider DSP Healthcare, ICICI Pru PHD, or Nippon India Pharma to get exposure to the sector.

Published on January 10, 2026