After the software boom biotechnology is touted to be the next sunrise segment that will lead growth over the next few years.

Before we say pharma funds look good now, investors need to understand a couple of points. The first is Indian pharma companies aren't really doing anything in biotechnology (biotech) worth raving about. The second point is pharma funds aren't really meant for everyone and have a totally risk-return profile than say a plain vanilla growth fund.

PHARMA FUNDS	NAV (Rs)	1 WK	1MTH	6 MTHS	1 YEAR	INCEP.
UTI SEC-PHARMA	9.8	2.4%	6.0%	-12.0%	-5.0%	-8.4%
MAGNUM PHARMA	8.9	3.3%	6.2%	-10.2%	-11.6%	-5.7%
PIONEER ITI PHARMA (G)	8.5	3.0%	2.9%	-13.8%	-16.3%	-4.0%

While biotech may have prospects brighter than even software did in its heydays, Indian pharma companies really haven't hopped onto the biotech bandwagon as yet. While software was a sector where India did and continues to enjoy a very significant edge, the same can be said about biotech only to a smaller extent. Other developed countries have already stolen a march over India in this field.

In terms of risk-return, pharma funds should ideally be included in a portfolio only if there are diversified equity funds already in it. In other words, investors should not look at pharma funds as their first investment, rather it should be added only after first making investments in a diversified growth fund that will insulate the investor from sector-specific risks of a pharma fund.

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