Mutual Funds Increase Healthcare Exposure, Turn Overweight on Earnings Recovery and Valuations

Domestic Mutual Funds Increase Exposure to Healthcare Stocks

Key Findings:

• 15 out of 21 fund houses (71%) are overweight in the healthcare sector, with a sector allocation of 7.3% in February 2026, making it the fourth-largest sector allocation.
• The sector has seen a steady increase in allocation month-on-month, despite broader market volatility.
• The Nifty Pharma index has outperformed the Nifty 50 during recent market weakness, with a gain of 0.2% over the past month compared to an 8.9% decline.

Sector Performance:

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• Over one year, the pharma sector has risen 8.8% against a 4.13% gain in the Nifty 50.
• Over three years, the sector is up 93%, far ahead of the Nifty 50's 37% return.

Top Fund Houses:

• Invesco Mutual Fund has allocated about 13% of its portfolio to healthcare, while Axis Mutual Fund, Canara Robeco Mutual Fund, and Motilal Oswal Mutual Fund are close to 10%.
• HSBC Mutual Fund has exposure above 9%, compared to a benchmark weight (BSE 200) of about 5.4%.

Key Stocks:

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• Sun Pharmaceutical Industries, Dr. Reddy's Laboratories, Biocon, and Apollo Hospitals remain widely held across most portfolios.

Expert Insights:

• Viraj Kulkarni, Fund Manager at Bandhan Mutual Fund, notes that pharma is a structurally strong sector with rising healthcare spending and an ageing population.
• Prateek Agrawal, CEO of Motilal Oswal Asset Management Company, believes that hospitals offer better visibility and a more predictable growth trajectory.
• Thomas Abraham, Analyst at Mirae Asset Sharekhan, expects a recovery in earnings and improving demand trends, driven by domestic formulations and emerging markets.

Risks:

• Risks remain across different parts of the healthcare space, including potential regulatory caps, rising competition, and regulatory actions in the US market.