Why Invest in Healthcare Funds?
By Akhil Chugh
Date September 18, 2022
Mutual funds provide a broad spectrum of investment options to investors, wherein they may choose to invest depending on their financial goals, investment horizon, and risk appetite. While different mutual fund schemes may define the broad investment categories, sectoral and thematic funds provide focused investment exposure to the investors towards specific sectors/ themes. Such funds allow investors to capitalize on the investment opportunities within that sector. Healthcare Fund is one such thematic fund focused on investing in the healthcare sector.
Healthcare is an evolving theme that has tremendous growth potential and includes businesses in hospitals, diagnostics, specialty chemicals, medical equipment, insurance, and other allied sub-sectors.
Let’s understand what are Healthcare Funds and why should investors consider investing in them to achieve financial goals.
What are Healthcare Funds?
Healthcare Funds are a type of sectoral mutual fund investing primarily in healthcare stocks. These funds invest in pharmaceutical companies, biotechnology firms, healthcare-affiliated industries, hospitals, diagnostics etc.
Healthcare is a sector with enormous opportunities, supported by long-term demographic trends and fundamentals. Healthcare is a “defensive growth” sector, characterized by its defensive and growth nature. It is defensive because of its low correlation with global macro conditions. Compared to other sectors, demand for healthcare is resilient and less impacted by economic swings.
Meanwhile, healthcare is also bolstered by growth from demographic trends and innovation. Rising income levels and increasing health consciousness post-pandemic and favourable government policies reflect the healthcare sector’s immense potential to grow in the future.
Investors can leverage its potential to grow the wealth required to achieve financial goals by investing in Healthcare Funds!
Why Invest in a Healthcare Fund?
1. Potential for Growth
The COVID-19 pandemic has spurred widespread innovation across the diverse subsectors of the healthcare industry over the past 2 years, making this an attractive industry for investors.
Innovations include an increase in the availability of telemedicine and home healthcare services observed within the initial stages of lockdown, a trend investors see enduring beyond the pandemic’s end.
By investing in non-traditional healthcare models, investors will observe a decrease in operational costs. In turn, this will make healthcare more affordable for patients and provide the opportunity for investors to generate more substantial long-term returns.
2. Attractive Valuations:
The healthcare sector has been an underperformer against the benchmark markets over the past few years. This may have happened due to various reasons, including FDA approvals, etc. However, this has also helped the sector stay at reasonable valuations against the overall markets.
It may be possible that most of these concerns may have already been addressed as well. As such, the sector may be standing at an inflection point, aiming to turn around with exciting opportunities in the dynamic economic environment.
3. Rising Healthcare Spending
India has one of the lowest medical spending as a percentage of GDP. However, such healthcare spending is expected to increase with the growing middle-class population. This is because post-COVID people have become more conscious and are willing to pay for better medical services. Further, the awareness about staying medically fit and preferences towards preventive check-ups provide another expansion opportunity for the companies operating in the sector.
4. Post Pandemic Opportunities
The COVID-19 pandemic has not only presented challenges but also several opportunities for India to grow. The crisis has opened the floodgates for Indian healthcare start-ups, many of whom have risen to the occasion and accelerated the development of low-cost, scalable, and quick solutions. Further, the pandemic has provided an impetus to the expansion of telemedicine and the home healthcare market in the country which have opened a new door of opportunities for the Indian Healthcare industry.
5. Favourable Government Policies
The Indian Government has undertaken deep structural and sustained reforms to strengthen the healthcare sector and has also announced conducive policies for encouraging FDI. The Aatmanirbhar Bharat Abhiyaan packages include several short-term and longer-term measures for the health system, including Production-Linked Incentive (PLI) schemes for boosting domestic manufacturing of pharmaceuticals and medical devices. Additionally, India is working towards becoming a hub for spiritual and wellness tourism, as the country has much to offer in Ayurveda and Yoga.
India is also a land of opportunities for players in the medical devices industry, with tremendous opportunities for the expansion of diagnostic and pathology centers as well as miniaturized diagnostics.
All these factors, together, make India’s healthcare industry ripe for investment.
Key Takeaways from Net Brokers:
- The Covid-19 pandemic has given a new thrust to the Indian healthcare sector. The pandemic has shifted a thrust towards healthcare, rising health insurance, and better diagnosis to bolster the healthcare sector demand.
- There is a growing emphasis on the emergence of Public-Private Partnership models in India’s healthcare sector. The country’s relative cost competitiveness and availability of skilled labour are also making it an increasingly favoured destination for Medical Value Travel
- Given the potential growth drivers and attractive valuations, Net Brokers is positive on the Healthcare sector. We suggest investing 5-10% of your overall portfolio in Healthcare Funds.
Consult the Net Brokers team to tap the best opportunities in the healthcare industry with the right Healthcare Funds!
For more information, get in touch with us today!
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