Increasingly we are seeing pharma occupy a large chunk of fund portfolios. While pharma was always visible in portfolios even earlier, we are now seeing more funds latching on to it and in some cases even more than software. We did a small study to find out how pharma stacks up in fund portfolios.

A lot of fund managers are of the opinion that pharma can be what software has been in 1999-2000. Like software, the country's potential in pharma is unmistakable and this can make pharma the next growth frontier for the country. That is one reason why a lot of fund portfolios are stacked with pharma right now. After a long time, software now has competition from another sector in fund portfolios. And pharma allocations are climbing, from additions as also capital appreciation. With pharma majors  Ranbaxy, Dr Reddy, Aventis running up significantly over the last couple of months, these funds have seen their NAVs (net asset values) perk up considerably.

Pharma: In the spotlight

Scheme	Holding as on	% Holding
BIRLA ADV FUND B	30-Apr-02	26.0
ZURICH I EQUITY G	30-Apr-02	20.5
K 30	31-Mar-02	20.4
DSP ML EQUITY	30-Apr-02	20.0
ZURICH I 200 G	30-Apr-02	14.6
MAGNUM EQUITY	30-Apr-02	12.6
HDFC GROWTH G	31-Mar-02	12.6
JM EQUITY G	31-Mar-02	12.0
IDBI-PRIN GR G	31-Mar-02	10.5
ALLIANCE EQUITY G	30-Apr-02	9.3
TEMPLETON GROWTH	30-Apr-02	9.0
FRANKLIN GROWTH	30-Apr-02	7.9

Investors need to be cautious of this feel-good factor with pharma. While there is no denying the growth that the sector can unlock, this unbridled enthusiasm can very easily turn perilous. Remember a similar feel-good notion for software brought about the fall of many a fund earlier.

Broad diversification is the key to successful fund management. Make sure your diversified fund does not turn into a pharma fund. Keep an eye on pharma allocations in your fund portfolio to ensure that you don't pay the price for your fund manager's over-optimism as some investors did during the tech bull-run.

 

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