Best Pharma Sector Mutual Funds in India 2025

The Indian pharmaceutical sector has long been the country's economic mainstay, rising to become the "Pharmacy of the World." With the world spotlight continuing to shine bright on healthcare, especially in the post-pandemic world, pharma sector mutual funds have seen rising investor interest in quest of sectoral exposure. In 2025, a general question is lingering in people's minds: What are the best pharma mutual funds that we can invest in, this year? In this blog, we will address the reasons why pharma funds are good investments, what to look out for, and an in-depth analysis of India's best-performing pharma mutual funds for 2025.

Why Should You Invest in Pharma Sector Mutual Funds?

Pharma mutual funds invest largely in companies operating in the sphere of pharmaceuticals, biotech, healthcare services, and medical devices. The mutual funds may provide high yields due to certain key benefits:

1. Defensive Nature : Pharma happens to be a 'defensive industry,' i.e., they have consistent performance even during an economic downturn. People continue to need medicine and healthcare services regardless of the condition of the economy.

2. Global Demand : India is one of the largest generic drug exporters. As expenditure on global healthcare keeps increasing, Indian pharma companies stand to benefit from rising demand abroad.

3. R&D and innovation : Indian pharma companies are ramping up R&D expenditure, focusing on biosimilars, specialty medicines, and patented pharmaceuticals. The trend has long-term growth potential.

4. Government Support : Government policies such as the Production Linked Incentive (PLI) scheme and greater focus on domestic API production provide the sector a tailwind.

Points to Keep in Mind Before Investment

While pharma funds are promising, they are risky and require strategic analysis:

• Sector-Specific Risk : Pharma funds are less diversified than other mutual funds. If the sector is bad, the fund overall will be bad.

• Regulatory Risks : The industry is very regulated. Any negative legislative changes (especially in the US and EU) can affect revenues.

• Volatility : FDA approval announcements, clinical trial announcements, or litigation announcements can drive pharma company stock prices.

Investors should be prepared for short-term volatility with a long-term focus.

Best Pharma Mutual Funds in India (2025)

Following are the top pharma mutual funds to watch out for in 2025, in terms of past performance, quality of fund house, and portfolio composition:

1. Nippon India Pharma Fund

• AUM : ₹8,080 crore

• 1-Year Return : ~16.01%

• 3-Year CAGR : ~19.17%

• Expense Ratio : ~0.91%

• Fund Manager : Sailesh Raj Bhan

Overview: Nippon India Pharma Fund is one of the oldest and most trusted names in the pharma sector. It has a well-diversified portfolio including major players like Sun Pharma, Cipla, Dr. Reddy’s, and Divi’s Labs. The fund has consistently outperformed its benchmark and peers over the long term.

Why Choose: Strong track record, experienced management, and diversified exposure across pharma, diagnostics, and healthcare equipment.

2. ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund

• AUM : ₹4,914 crore

• 1-Year Return : ~20.74%

• 3-Year CAGR : ~23.04%

• Expense Ratio : ~1.18%

• Fund Manager : Dharmesh Kakkad, Sharmila D'mello

Overview: The fund goes beyond the pharma stock benchmarks to add diagnostics and health service providers to have more healthcare system exposure.

Why Choose: Unconventional strategy, focus on long-term healthcare themes, and solid research-based stock selection.

3. Tata India Pharma & Healthcare Fund

• AUM : ₹1,183 crore

• 1-Year Return : ~17.64%

• 3-Year CAGR : ~20.30%

• Expense Ratio : ~0.72%

• Fund Manager : Meeta Singh and Rabat Srivastava

Overview: A relatively newer but well-performing fund, Tata India Pharma & Healthcare Fund balances large and mid-cap pharma players, diagnostics, and biotech entities.

Why invest: Ideal for moderate risk-takers who want to have a diversified pharma bet with improved returns.

4. DSP Healthcare Fund

• AUM : ₹3018 crore

• 1-Year Return : ~16.80%

• 3-Year CAGR : ~20.31%

• Expense Ratio : ~0.63%

• Fund Manager : Chirag Dagli

Overview: The DSP Healthcare Fund focuses on investing in healthcare companies, aiming to grow your money over the long term. They do this by investing in a mix of healthcare stocks, spreading the risk across different companies.

Why invest? It is expected to grow in the future, driven by factors like new medical technology and aging population

*The above-mentioned returns are as per April’2025.

You may also like to read: How to Choose Mutual Funds for Investment in India?

Who Should Invest in Pharma Funds?

Pharma industry mutual funds are best suited for:

• Sector Enthusiasts : Individuals familiar with the pharma segment and who are convinced of its long-term growth.

• Diversifiers : Current owners of diversified funds who want targeted exposure to healthcare.

• Long-Term Investors : Investors who can remain invested for at least 3–5 years to ride out short-term volatility.

Remember that sector funds are not for conservative or short-term investment horizon investors.

Investment Tips for Pharma Mutual Funds

• Hold on to the Direct Plan : It reduces the expense ratio, which increases your returns in the long run.

• SIP for Volatility : Systematic Investment Plans (SIPs) help in timing of entry and reduction of average cost.

• Review Annually : Track sectoral change, fund performance, and rebalance if necessary.

• Don't Overallocate : Invest not more than 5-10% of your entire portfolio in your pharma fund.

Conclusion

In 2025, the pharmaceutical industry in India continues to be a good opportunity for investment, backed by international demand, the government, and innovation. Pharma sector mutual funds can be a good wealth-generation tool if handled wisely. However, as with any investment, proper research and alignment with your financial goals is necessary.

If you are looking to invest in an industry that is a focused, growth area within your portfolio, these top pharma mutual funds are certainly worth considering.

Disclaimer: Investment in mutual funds involves market risks. Past performance is not indicative of future performance. Kindly consult a financial advisor before investing.