The US-Iran conflict has impacted every segment of the equity market in the last three weeks including the healthcare sector, BSE Healthcare and Nifty Pharma nonetheless.

Compared to 11 per cent decline year-to-date in Nifty 50, BSE Healthcare has declined by 2 per cent and Nifty Pharma has remained flat.

Despite the impact, sector exposure is necessary for downside protection in case of the conflict spreading and lasting for longer a timeline.

If countries manage to avoid a force majeure in the medium term, the sector also has an upside potential. Investors should gain exposure to the sector through SIPs in such volatile markets to hedge against uncertainties.

We reviewed healthcare funds in January 2026 and DSP Healthcare was noted as a top-performing fund in the sector. We now review the fund’s performance and its latest portfolio holdings for investors to consider.

Longer impact

Equity market volatility in the last three weeks is a reaction to disrupted supplies in the short term, but more importantly it is also a reflection of long-term impact post the conflict.

A long-lasting impact on energy infrastructure will reshape earnings trajectory stemming from energy and commodity costs, logistics costs, export market potential and consumption patterns domestically and internationally. The broader index decline is attributable to such factors.

The impact in pharma and diagnostic labs should be limited to cost of precursor chemicals from China.

While operational challenges on energy, logistics and power will be volatile, the cost impact should not be material and similar is the case for hospitals. Healthcare sector’s downside should be limited compared to broader index, as has been the case so far.

Upside potential

Pharmaceuticals, which account for the largest share of the healthcare sector, are eyeing the next large opportunity with generic semaglutide launch in diabetes and weight management segments in India.

The fourth quarter results discussion in April-May should draw focus on the opportunity and each company’s approach for the opportunity starting from key starting material production (Divi’s or other CDMO players), or in partnership (Cipla with Eli Lilly for tirzepatide) or with their own generic (Sun Pharma, Torrent Pharma, Dr. Reddy and others).

The US market with stable generic pricing, and branded pharma growth in India and other emerging markets, are also positives for the sector.

Hospitals and diagnostics are continuing with their expansion plans.

The lack of pricing power for diagnostics is being substituted with volume growth and launch of packaged tests.

Hospitals have added robotic surgeries along with capacity expansions, allowing for a strong pricing and volume lever for the sector.

Valuations, in the initial phase of the conflict, are reflecting the long-term impact on the economy versus the upside potential of the sector.

BSE Healthcare and Nifty Pharma one-year forward PE are at a 8-10 per cent premium to last five-year average compared to a 10 per cent discount for Nifty 50.

Fund performance and portfolio

The fund has outperformed benchmarks consistently. Since its launch in November 2018, based on daily average of rolling returns, the fund has beaten BSE Healthcare - fairly (which is the composite of pharma and healthcare) and Nifty Pharma - significantly, as shown in the table for 1-year, 3-year and 5-year timeframes.

An SIP in the fund from inception would have yielded an XIRR of 18.4 per cent for the fund compared to 13.5 per cent for Nifty Pharma and 14.9 per cent for Nifty-50 TRI indices. The outperformance is also reflected in the percentage of days the fund beat the index outperforming Nifty Pharma 98 per cent of the days on a 5-year rolling return basis and BSE Healthcare only 72 per cent of the days, pointing to a consistent but modest outperformance against the composite index. Since August 2025, the BSE Healthcare 5-year rolling returns have bettered the fund’s performance on most of the days.

The fund holdings are well diversified with 30 stocks in the portfolio as of February 2026. The top-5 stocks by weight (Sun Pharma, IPCA Labs, Cipla, Globus Medical and Laurus Labs) account for 40 per cent of the portfolio.

The fund has a 17 per cent exposure to international med-tech companies: Globus, Illumina, and Intuitive Surgicals.

The domestic diagnostics exposure is limited to Vijaya Diagnostics.

The fund has a strong exposure to emerging CDMO companies Laurus, Sai Lifesciences and Cohance. Hospitals exposure is led by Apollo Hospitals and Kovai Medical.

Pharmaceutical exposure with Sun, Cipla and IPCA Labs should provide generic semaglutide launch exposure as well with Sun Pharma being a leader in Indian pharma and diabetes sections.

Published on March 28, 2026