Thematic funds as mentioned earlier are unique in that they focus on a single sector or at most on sectors allied to a single sector when choosing their investment portfolio. Common examples include infrastructure funds, energy funds, agriculture funds, mining funds, pharma funds and so on. The main risk in case of these funds lies in the fact that sector-based funds are prone to mirror the booms and busts of the sector they are invested in this can cause a high degree of volatility resulting in a high degree of risk. This risk extends to the principal amount invested as well thus, for the most part, thematic funds are considered ideal for investors with high-risk appetite who are bullish about the specific sector the fund is invested in.
The SBI Pharma Fund is an open-ended equity fund which mainly invests in India’s pharmaceutical sector as well as a few companies in the healthcare sector. As the investments of this mutual fund will be mainly focused on a single sector or theme namely pharmaceuticals, it is therefore categorized as a thematic or sectoral fund. The key feature of thematic funds is that when the sector is in the boom, these funds show rapid growth, however, there is always the possibility that at the end of the boom years, the fund may start to underperform. Since its inception close to 2 decades back, the SBI Pharma Fund has performed solidly and successfully navigated various booms and busts in order to emerge as one of the top choices in the thematic equity mutual funds segment.
SBI Pharma Fund Investment Objective
The SBI Pharma Fund aims to grow investors’ money by targeting growth of India’s healthcare sector. As the name suggests it would primarily invest in pharmaceutical and related sectors. In order to balance the usual high investment risk including risk to the principal observed in the case of such thematic funds, the SBI Pharma Fund is expected to follow a multi-cap approach. The fund is focused on providing investors with unmatched opportunity to benefit from investments made into India’s healthcare sector. The SBI Pharma Fund would invest in an actively managed portfolio of pharmaceutical stocks in order to help investors reap the benefits of the sector’s continued growth. Due to the inherent risk of thematic investments including risk to the principal amount invested, the SBI Pharma Fund is considered most suitable for investors who expect robust growth of India’s healthcare market, while being significantly risk tolerant regarding their investments.
Risk Level of the SBI Pharma Fund
The SBI Pharma Fund is a thematic fund which translates into a high degree of exposure to India’s pharmaceutical and healthcare industry. As a result, it will be affected by the bust and boom cycles governing the Indian pharmaceutical/healthcare industry. As a result, the SBI Pharma Fund is classified as a high-risk investment. In order to marginally balance this risk and increase the overall diversity of the portfolio, this mutual fund follows a multi-cap approach. At present, an estimated 37% of the portfolio comprises large cap investments while mid and small cap equity investments form an estimated 48% and 14% respectively of the current portfolio. However, even after such portfolio diversification, changes in the Indian healthcare industry at large and pharmaceutical industry, in particular, will continue to have a significant impact on the performance of the SBI Pharma Fund.
Tax Considerations of the SBI Pharma Fund
The SBI Pharma Fund is mainly invested in equities and thus the taxation rules of equity mutual funds with respect to short term and long term capital gains apply to it. Short term capital gains in case of equity funds refer to units that are redeemed/switched prior to completion of 1 year from the date on which the units were allotted. Profits on redemption/switch of any units held beyond a 1 year period after allotment will be subject to long term capital gains taxation rules of equity funds. As per the current system, short term capital gains are taxed at 15%, while long term capital gains are tax-free in the case of equity funds like the SBI Pharma Fund. Dividends obtained by the investor from SBI Pharma Fund are also tax-free. However, a dividend distribution tax of 25% is payable by SBI MF AMC to the government whenever dividend pay outs are declared. This is passed to the investors in the form of a higher expense ratio for the dividend option.
SBI Pharma Fund Key Features and Statistics
Inception: The SBI Pharma Fund was launched almost 2 decades back in July 1999.
Entry Load: No entry load is applicable to the SBI Pharma Fund as a result of a SEBI directive to that effect.
Exit Load: An exit load of 0.5% is applicable in case units of the fund are redeemed within 15 days of the allotment of the fund’s units. This exit load is nil in case units of the fund are held for over 15 days from the date on which units of the fund were allotted.
Minimum Investment Amounts: For first-time investors, the minimum lump sum investment amount for the SBI Pharma Fund is Rs. 5,000. Additional minimum lump sum investment for existing individual investors of the scheme is fixed at Rs. 1,000. In the case of SIP, the minimum individual investment amount is Rs. 500 and the minimum duration for SIP, in this case, is 12 months.
Fund Manager: Mr. Tanmaya Desai has been managing the SBI Pharma Fund since June 2011. He joined SBI Mutual Fund AMC in the year 2008. Prior to joining SBI MF AMC, he had worked as a lecturer at D.J. Sanghvi College of Engineering, Mumbai in the engineering department and had previously worked as a software engineer at Patni Computer Systems. He is an engineering graduate with a Masters in Finance from the prestigious Narsee Monjee Institute of Management Studies.
Plans and Options for SBI Pharma Fund
Regular Plan: The regular or retail plan of SBI Pharma Fund is the most commonly availed variant as it can be availed through multiple channels including various 3rd party market intermediaries such as Paisabazaar.com. The regular plan features a slightly lower NAV as compared to the direct plan, however, its potential returns are lower as well due to the higher expense ratio as compared to investing directly.
Growth Option: This option is favored by individuals with higher risk appetite who are investing with the goal of capital appreciation in the medium to long term. In this case, the investor does not receive any payouts during the time he/she stays invested in the fund. Any profits made by the fund are invested further to increase the AUM and NAV of the fund. Thus, the investor can book capital gains when he/she decides to redeem/switch units of the fund at a later date.
Dividend Option: The dividend option - both payout and reinvest are considered ideal for investors seeking to generate consistent returns while staying invested. Dividends may be declared by the fund whenever there is profit and distributable surplus. However, there is no guarantee that the fund will make a profit or choose to share profits even if there is a distributable surplus. Such decisions are based on various factors that affect market conditions.
Key Holdings of SBI Pharma Fund
The following are some leading investments made by SBI Pharma Fund across key industries and companies in India.*
|Pharmaceuticals||Strides Shasun, Lupin, Aurobindo Pharma, Cipla, Divis Labs, Natco Pharma, Torrent Pharma, Sun Pharma, Cadila Healthcare, Alkem Laboratories, Neuland Laboratories, Sequent Scientific, Laurus Labs, Dr. Lal PathLabs, Dr. Reddys Laboratories, Sanofi India, Gufic Biosciences, Ajanta Pharma, Glenmark, etc.|
|Services||Thyrocare Technologies, Apollo Hospitals Enterprises, Narayana Hrudayalaya, etc.|
*The above list is provided as an illustration and is subject to periodic change based on business requirements of SBI Mutual Fund AMC and/or guidelines released by SEBI.
Investing in SBI Pharma Fund through Paisabazaar.com
The Paisabazaar.com mutual fund platform offers a simple and secure way to invest in equity, debt and hybrid mutual funds of your choice. The prospective investor can sign up for an investment account free of charge and complete CAMS eKYC in order to get his/her free investment account operational. Once the account is up and running, you can search for one or more of our partner fund house’s offerings such as the SBI Pharma Fund. By logging into your account, you can also view key statistics of the mutual fund such as returns, previous NAV, risk profile etc. and also compare it with other funds in the same category or across several categories. Once you have chosen the variant – growth/dividend option of a fund, you can input the SIP/lump sum investment amount and make your payment online through the net-banking facility of your registered bank in India. After the transaction is completed, units of equal value based on the applicable NAV are credited to your Paisabazaar.com mutual fund account within 2 working days.