Fund of Fortnight

This is our mutual fund recommendation. Every fortnight , we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same

Reason for recommendation
In normal circumstances, sector funds are usually not advised to an investor. And if you are confident of a sector’s outperfor- mance, it is better to take exposure through a fund that has higher exposure to such a sector. Nevertheless, if you believe that the surge in a sector has just started and will continue for a while, then you can adopt an aggressive stance and can directly invest into a sector-related fund. One such opportunity that we see is in the healthcare sector. This is one of the best sectors to perform in the last 15 months and there is still more room to grow.

Historically, we have seen that this sector remains in a bullish phase for at least two years. One of the best funds in this sector is Nippon India Pharma Fund. This is one of the oldest funds in its category and has been able to beat the benchmark returns comfortably. Since the start of 2013, the fund has been able to generate three-year average rolling return of around 10 per cent compared to the benchmark generating return in single digit. The primary investment objective of the scheme is to seek to generate consistent returns by investing in equity and equity- related or fixed income securities of pharmaceutical and other associated companies.

The best part of the fund is that when the market moves up, it gains much faster and while coming down it falls less as reflected in its capture ratio of greater than one. The fund has major exposure to large-cap-dedicated healthcare companies that constitute more than 70 per cent of the corpus. The 24 companies where the fund has made investments are well- diversified into generic companies, hospitals and diagnostic companies. This will partly help the fund to protect itself from the cyclical nature of the sector. The fund is suitable for an aggressive investor who has a minimum investment horizon of five years.