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Nippon India Nifty Pharma ETF: Seizes Growth from the Leading Sector
Jun 25, 2021

The Indian Pharmaceutical sector has witnessed a significant growth owing to steady demand and budding sales of drugs and medical supplies amid the COVID-19 pandemic. In terms of pharmaceutical drugs as well as COIVD-19 vaccine production and distribution, the government has taken various measures to support the healthcare and pharmaceutical sector.

India plays an important role in the global pharmaceuticals sector, while the low cost of production boosts the efficiency of Indian pharma companies, which leads to competitive exports. In the Union Budget 2021, the government approved the Production Linked Incentive (PLI) scheme for the benefit of pharmaceutical companies.

The Indian Pharmaceutical sector has been one of the fastest growing sectors. The impact of this second wave and the possibility of a third wave of COVID-19 exhibit a future demand and growth in this sector. An Exchange Traded Fund is a smart way of investing in an entire basket of Pharma stocks rather than selecting individual companies from this leading sector.

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Nippon India Mutual Fund has launched Nippon India Nifty Pharma ETF, it is an open-ended scheme replicating/ tracking NIFTY Pharma Index. This scheme offers investors an exposure to leading pharma stocks.

The pharmaceutical sector is evolving and will continue to pursue new opportunities in years to come because of a need to develop better medicine and innovate on healthcare products.

Table 1: Details of Nippon India Nifty Pharma ETF

Type An open-ended scheme replicating/ tracking NIFTY Pharma Index. Category Exchange Traded Fund
Investment Objective The investment objective of the scheme is to provide investment returns closely corresponding to the total returns of the securities as represented by the NIFTY Pharma Index before expenses, subject to tracking errors. However, there can be no assurance or guarantee that the investment objective of the Scheme will be achieved.
Min. Investment Rs 1000/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
Entry Load Not Applicable Exit Load Nil
Fund Manager - Mr Mehul Dama Benchmark Index Nifty Pharma TRI
Issue Opens: June 21, 2021 Issue Closes: June 28, 2021
(Source: Scheme Information Document)

What will the Investment strategy for Nippon India Nifty Pharma ETF be?

Nippon India Nifty Pharma ETF is a passively managed exchange traded fund that will employ an investment approach designed to track the performance of NIFTY Pharma TRI.

The scheme offers investors an opportunity to have exposure to stocks of leading pharma companies. The scheme aims to achieve its objective by investing in securities constituting the NIFTY Pharma Index in the same proportion as in the Index.

It will endeavour to replicate the performance of the underlying index to generate equivalent returns by minimizing tracking errors.

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About the benchmark

NIFTY Pharma Index captures the performance of the pharmaceutical sector. The Index comprises of 10 companies listed on National Stock Exchange of India (NSE).

NIFTY Pharma Index is computed using the free float market capitalization method, wherein the level of the index reflects the total free float market value of all the stocks in the index relative to a particular base-market capitalization value.

The following list is the top constituents under the index by their weightage as of May 31, 2021:

This scheme, apart from investing 95% of its assets in securities constituting NIFTY Pharma Index, will invest up to 5% of its assets in money market instruments including tri-party repo on government securities or treasury bills, cash & cash equivalents or liquid schemes in order to meet the liquidity requirements of this scheme.

Under normal circumstances, asset allocation will be as under:

Table 2: Asset Allocation of Nippon India Nifty Pharma ETF

Instruments Indicative Allocations
(% of Net Assets)
Risk Profile
High/Medium/Low
Minimum Maximum
Securities constituting NIFTY Pharma Index 95 100 Medium to High
Money Market Instruments including Tri-Party Repo on Government securities or Treasury bills, cash & cash equivalents or Liquid Schemes* 0 5 Low to Medium

*The Fund Manager may invest in Liquid Schemes of Nippon India Mutual Fund and other schemes of a mutual fund registered with SEBI that invest predominantly in the money market securities.

(Source: Scheme Information Document)

Who will manage Nippon India Nifty Pharma ETF?

Mr Mehul Dama will be the dedicated fund manager for this scheme.

Mr Mehul Dama is Fund Manager and Dealer - ETF at Nippon Life India Asset Management Pvt. Ltd. He has over 10 years of experience in financial services. Prior to this, he worked with NAM India as Dealer - ETF and Lead - Finance ETF, Goldman Sachs Asset Management (India) Private Limited as Vice President - Controllers, Benchmark Asset Management Company Private Limited as Assistant Vice President - Operations / Controllers, and Lovelock & Lewes as Assistant Manager.

Mr Dama is Chartered Accountant (C.A) and B.com graduate. The other schemes he manages are Nippon India ETF Consumption, Nippon India ETF Dividend Opportunities, Nippon India ETF Gold BeES, Nippon India ETF Infra BeES, Nippon India ETF Nifty 100, Nippon India ETF NV20, Nippon India ETF PSU Bank BeES, Nippon India ETF Sensex, Nippon India ETF Shariah BeES,

Nippon India Index Fund - Nifty Plan, Nippon India Index Fund - Sensex Plan, Nippon India Gold Savings Fund, Nippon India ETF Nifty Midcap 150, Nippon India Junior BeES FoF, Nippon India ETF Sensex Next 50, Nippon India ETF Nifty IT, Nippon India Nifty Smallcap 250 Index Fund, Nippon India Nifty Midcap 150 Index Fund, Nippon India Nifty 50 Value 20 Index Fund, Nippon India Passive Flexicap FoF.

Fund Outlook - Nippon India Nifty Pharma ETF

Nippon India Nifty Pharma ETF aims to invest in the top 10 Pharma companies listed on NSE and comprise under the Nifty Pharma Index. The scheme's performance will depend on the performance of the underlying index and its constituents.

Pharma has emerged as one of the fastest growing sectors amid the pandemic. However, the sustainability of the growth in this sector will depend on how the companies attain self-sufficiency in manufacturing, accelerate research and innovation, etc. among other factors. If the sector moves out of favour, investment in pharma-oriented funds can lead to heavy losses due to the concentrated nature of the portfolio.

This scheme is simply suitable for investors seeking long-term capital growth and to invest in the scheme replicating the composition of the Nifty Pharma Index. Ensure you have a very high-risk appetite, long investment horizon, and that your investment objective is aligned with the fund.

PS: If you wish to select worthy mutual fund schemes, I recommend that you subscribe to PersonalFN's unbiased premium research service, FundSelect.

Additionally as a bonus, you get access to PersonalFN's popular debt mutual fund service, DebtSelect.

PersonalFN recommendations go through our stringent process that assesses both quantitative and qualitative parameters, providing you with Buy, Hold, and Sell recommendations on equity and debt mutual fund schemes. Read here for details...

Author: Mitali Dhoke

This article first appeared on PersonalFN here.

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PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

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