NFO Review: Nippon India Nifty Pharma ETF offers exposure to top 10 pharma stocks

Staff Writer   /   June 21, 2021

Nippon Life India Asset Management has launched a passive fund product called Nippon India Nifty Pharma ETF. This is an open-ended scheme replicating/tracking Nifty Pharma Index which allows you to invest in 10 top pharma stocks at one go. Incidentally, this would be the 3rd ETF product in the pharma/healthcare fund category, which has seen ETF launches only this year. Here are more details.

Why pharma now

The Indian pharmaceuticals sector has been one of the fastest growing sectors especially in the aftermath of COVID-19.

The Exchange Traded Fund (ETF) route is a smart way of investing in an entire basket of stocks rather than selecting individual companies.

If you invest in Nippon India Nifty Pharma ETF, you can invest into 10 leading pharma companies listed on NSE. The stock constituents of the index are Sun Pharmaceutical Industries, Dr. Reddy’s Laboratories, Divi’s Laboratories, Cipla, Lupin, Aurobindo Pharma, Biocon, Cadila Healthcare, Torrent Pharmaceuticals and Alkem Laboratories.  
Top existing pharma/healthcare funds are all actively managed, and this list includes Nippon India Pharma, ICICI Pru Pharma Healthcare & Diagnostics, SBI Healthcare Opportunities, Mirae Asset Healthcare, and DSP Healthcare. The only other passive investment options in this space are Axis Healthcare ETF and ICICI Pru Healthcare ETF.

Why ETF route

There are different pharma/healthcare focussed mutual funds. Nippon India Nifty Pharma ETF provides low-cost exposure to leading pharma stocks, trades on real-time basis and ensures elimination of non-systematic risks.

The ETF route provides instant diversification through exposure to a large number of stocks by purchasing as low as 1 unit. One can engage in buying / selling at close to live price and not end-of-day, also ability to put limit orders.

Do note that authorised participants / large investors can buy in creation unit size directly from the AMC at live prices in creation unit sizes.

The Nifty Pharma index undergies review semi-annually based on data for six months ending January and July. Index rebalancing is done on a semi-annual basis and made effective from the last trading day of March and September.

NFO features

Benchmark – Nifty Pharma TRI
Fund Manager – Mehul Dama
NFO Period NFO Opens on – June 21, 2021
NFO Closes on – June 28, 2021
Value of Unit – The value of each unit of the Scheme would be approximately equal to 1/1000th of the value of Nifty Pharma Index
Load Structure – Entry & Exit Load Nil
Minimum Application (During NFO) – Minimum amount of Rs 1,000 and in multiples of Re. 1 thereafter

Pharma fund returns

Over the last one year, pharma funds have delivered between 42 per cent to 56 per cent.

In the  last 3 year period, pharma funds have given between 23 per cent to 26 per cent CAGR.

In the last 5 year period, these sectoral funds have given between 11 per cent to 18 per cent CAGR.

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