The poor performance of pharmaceutical and IT sectors in the recent past has raised the question on whether it is prudent to invest in these sectors now. While a few experts believe that the sectors may see a turnaround in the near future making this the right time to invest in them, others recommend a more cautious approach.
“If you have to take a sectoral fund view, then you have to look at sectors which are out of favour rather than the ones which are in favour. One or two sectors that investors might look are the pharmaceutical and IT sectors. The pharmaceutical sector has seen a lot of negative impact over the last couple of years but it is a good choice for long-term investors,” says Vishal Dhawan of Plan Ahead.
He further adds that aggressive investors can evaluate technology funds as well. Vishal, however, prefer recommending invest in these funds through SIP or STP to take the benefit of volatility.
Giving a positive outlook to these sectors Navneet Munot, CIO of SBI Mutual Fund says, “The IT and pharmaceutical sector have been going through a rough patch but after some more correction, they may also become a contrarian play.”
Currently, these two export-oriented sectors have been under pressure due to the regulatory woes from the US FDA, Trump administration and strengthening of the rupee, he adds.
“If your portfolio has tendency to either swing between high beta and low beta then probably some exposure to sectoral funds that have a negative correlation can change the net results. There is much more visible in pharmaceutical sector than IT sector. Pharmaceutical funds may not give high returns from a short-term perspective, however, it may start giving attractive returns in three to four years’ time,” says Lalit Nambiar, equity fund manager of UTI Mutual Fund.
He adds that investors should wait for some structural reforms and stability in the IT space before investing in IT funds.
Investors typically invest in sectoral funds, which can give higher returns than diversified funds. Mahesh Patil, Co-CIO (Equity) does not see any sectoral fund, which can outperform diversified funds in the current scenario.
He says, he would not suggest pharmaceutical or IT funds to investors. “There are still uncertainties in these two sectors. However, pharmaceutical stocks have corrected and one can take small exposure in these funds. Structural changes are taking place in the sector and there is no clarity on how the things would settle down. One can take a contrarian call but it is not advisable at this point in time,” says Mahesh.
Vinod Jain of Jain Investments says that the appreciating rupee is not beneficial for these two export-oriented sectors. He believes it is still early to take a call on IT and pharmaceutical funds.
