Pharma Funds

Market Updates

  • Spend on healthcare as a ~5% of GDP is much lower in India as compared with other developed and developing economies. Majority of this expenditure is not funded by the Government, making it an out of pocket.
  • Under-penetration, in terms of Last Mile Reach, provides a good opportunity in the sector with improving government expenditure and increasing participation of private sector.
  • Demographically, India has one of the largest youth populations. However, with a senior citizen population at ~16Cr, together with increasing life expectancy, demand for healthcare is expected to increase.

Advantage India: Indian Pharmaceutical Sector

  • Cost Efficient: Production cost in India is ~40% lower than western
  • India has the 2nd largest number of USFDA-approved manufacturing plants outside the US, with 2633 FDA-Approved Drug.
  • Policy Support: Govt initiative: “Pharma Vision 2020” to make India a global leader in manufacturing.

Pharma sector is in consolidation phase : Growth is likely to  return  in  the ensuing future, with concerns largely priced in

Period Trend Growth Competition Regulatory

issues

Profitability Stock

returns

FY 2006 –

2015

 

Up Cycle

Robust growth in US and

India

low due to  rapid expansion

of mkt

Low as USFDA promoted

generics

Sharp Improvement  

5x-15x

 

FY 2016 –

2017

 

Consolidation

Moderate US growth. Steady growth in

India

High due to large number of players High as USFDA is pushing to improve quality  

Steady

 

Correction & consolidation

 

FY 2018

onwards

 

 

Up Cycle

 

Moderate growth in US and India

 

Low in complex and speciality products

Likely to see decline in as companies become

compliant

Expected to improve as companies move into complex

products

 

Should do well again

 

Many drivers for growth of Indian Pharma market : Growth to be driven by a combination of low penetration, growing markets and increasing insurance coverage/ household incomes.

  Looking at NIFTY PHARMA INDEX, one can conclude that investing in Pharma Sector is advisable.

 

Date Nifty Pharma
24-Feb-11 4,300.25
08-Apr-15 13,831.15
21-May-18 7,983.20
28-Sep-18 9,972.45

Growth of Nifty Pharma between 24.02.2011 & 08.04.2015 = 13831.15 4300.25 = 9530.90 Desired Fibonacci Retracement = 9630.90 X 61.08 % = 5890.10

Valuations of Nifty Pharma (As per Fibonacci Retracement) = 13831.15 5890.10 = 7941.05 Nifty Pharma Index on 21st May 2018 = 7983.20

Nifty  Pharma Index  on 28th  Sep  2018 = 9972.45

 Observations : Nifty Pharma seems to have bottomed out in May 2018 (Retracing 61.80% of previous gains) after a correction period of 3 years. We may be entering in long term upward trend of the Pharma Index and the rally may continue for atleast couple of years (2-3 years).

Scheme Date of

Launch

NAV as on

28.09.2018

Period Absolute

Return

Annualised

Return

Mirae Asset Healthcare Fund 03-07-2018 10.655 87 6.55% 27.48%
ICICI Pru PHD Fund 16-07-2018 10.440 74 4.44% 21.70%

Disclaimer : Mutual Fund investments are subject to market risk. Read all scheme related document carefully.

 

Author: Midas Finserve

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