Let’s be honest. Most of us only think about healthcare when something goes wrong — a hospital bill that makes your jaw drop, or a medicine that costs more than your monthly grocery run. But here’s the thing: that same expensive, ever-growing sector can actually work in your favour as an investor.

India’s healthcare industry is one of the fastest-growing in the world. India supplies 20% of all generic medicines globally and is the world’s largest vaccine manufacturer. The industry was valued at $280 billion in 2020 and is projected to reach $610 billion by 2026. That kind of growth doesn’t happen quietly — and healthcare mutual funds let you ride along.

But before you rush to invest, let’s understand what these funds really are, which ones stand out, and — equally important — who should stay away.

What Are Healthcare Mutual Funds?

A healthcare mutual fund is a sectoral or thematic equity fund that invests primarily in companies operating within the healthcare ecosystem. This includes pharmaceutical manufacturers, hospital chains, diagnostic labs, biotech firms, medical device companies, and even health insurance players.

As per SEBI regulations, these funds must invest at least 80% of their assets in equity and equity-related instruments of healthcare sector companies. The rest can be held in debt or cash equivalents for liquidity.

Think of it this way: instead of picking one pharma stock and crossing your fingers, a healthcare mutual fund spreads your money across 30–50 companies in the sector. You still get sector-specific exposure, but with a layer of diversification within it. Not a full safety net — but certainly a softer landing than going all-in on a single stock.

These funds typically fall under two sub-types — Pharma Funds (tighter focus on drug manufacturers) and Healthcare Funds (broader scope including hospitals, diagnostics, biotech). Many funds blend both.

Top Healthcare Mutual Funds in India (2025)

Here’s a look at some of the most talked-about and well-performing healthcare mutual funds in India. Note: All performance data should be verified from fund houses or platforms like Groww, INDmoney, or ValueResearch before investing.

*Returns are indicative, sourced from publicly available data as of early 2025. Past performance does not guarantee future results. Always verify latest returns from official fund house websites or SEBI-registered platforms.

Quick Comparison: Key Parameters at a Glance

Why Invest in a Healthcare Mutual Fund?

There’s a strong logical case for healthcare as an investment theme in India — and it goes beyond just “people always get sick.” Here’s what actually supports this sector’s long-term potential:

India is the Pharmacy of the World. The country supplies generic medicines to over 200 nations and holds a 20% share of global generic drug exports. This is not a domestic play alone — it’s a global export story.

Defensive nature during downturns. Healthcare demand doesn’t disappear in a recession. People still need medicines, hospitals, and diagnostic tests when the economy slows. That’s why pharma stocks held up relatively better than most sectors during market corrections. Even during COVID-19, while Nifty50 fell nearly 40%, pharma companies bounced back sharply and the Nifty Pharma Index went on to post gains of ~200% from its lows.

An aging population and rising chronic diseases. India’s middle class is expanding, health awareness is growing, and lifestyle diseases like diabetes and hypertension are on the rise. More patients mean more prescriptions, more hospital visits, and more diagnostic tests — all good news for healthcare stocks.

Medical tourism on the rise. India’s medical tourism market is expected to cross $13 billion by 2026. Patients from across Asia, Africa, and the Middle East choose India for affordable quality care. Hospital chains benefit directly.

The Risks You Should Not Ignore

Healthcare mutual funds come with real risks. Anyone who tells you otherwise is either selling something or hasn’t paid attention to how pharma stocks behave.

As INDmoney correctly notes, given the high-risk nature of these funds, they suit experienced investors who understand the sector’s dynamics. Beginners should consider them as a small part of a well-diversified portfolio — not the whole show.

Who Should (and Shouldn’t) Invest in Healthcare Funds?

You should consider investing if…

• You have a high risk appetite and can hold for at least 5 years without panicking at dips.
• You believe in India’s long-term healthcare growth story — and you have data to back that belief.
• You want to add a sectoral allocation (10–15% of your total portfolio) alongside core diversified funds.
• You’re an experienced investor who tracks sector news and understands macro trends in pharma.

You should probably skip it if…

• You’re a first-time mutual fund investor — diversified funds are a much better starting point.
• You need the money within 1–3 years. Sector funds need time to deliver.
• You want to invest more than 15% of your portfolio in one sector. That’s not diversification — that’s a bet.
• You get nervous looking at your portfolio every week. Healthcare stocks can be volatile.

How to Start Investing in a Healthcare Mutual Fund

The process is simpler than most people think. Here’s a straightforward path:

First, use a mutual fund comparison platform — Groww, INDmoney, Smallcase, or Zerodha Coin are all popular, SEBI-registered options. Filter the healthcare/pharma sector category and compare funds on 3-year CAGR, 5-year CAGR, expense ratio, and AUM size.

Second, check the expense ratio. A lower expense ratio means more of your returns stay with you. Look for direct plans over regular plans — they have lower costs because there’s no distributor commission involved.

Third, start with a SIP rather than a lump sum. Most healthcare funds allow SIPs starting at just ₹500 per month. SIPs help you average out market volatility over time — a smart strategy for a high-volatility sector like healthcare.

Fourth, keep your healthcare fund allocation to 10–15% of your total equity portfolio. Combine it with large-cap or flexicap diversified funds for balance. Don’t let a sector fund dominate your portfolio.

Taxation on Healthcare Mutual Funds

Since healthcare mutual funds are equity-oriented, they follow equity mutual fund taxation rules as per the 2024 Union Budget.

LTCG up to ₹1.25 lakh in a financial year remains tax-free. Plan your redemptions accordingly — especially if you’ve been investing via SIP for several years and are thinking about partial withdrawals.

Final Verdict: Which Healthcare Fund Is the Best?

Here’s the truth: the “best” healthcare mutual fund is the one that fits your goals, risk tolerance, and investment horizon — not the one with the highest historical return.

That said, if we had to give a practical answer for most Indian investors: SBI Healthcare Opportunities Fund (for trust and track record), Nippon India Pharma Fund (for retail accessibility — SIP starts at ₹100), and UTI Healthcare Fund (for breadth of exposure) are consistently among the top performers with strong AMC backing.

Mirae Asset and DSP Healthcare are excellent for investors who prefer a more concentrated or blended approach respectively.

But remember — and we can’t say this enough — do not put more than 10–15% of your equity portfolio in any single sector fund. Healthcare can outperform brilliantly when the stars align, but it can also lag for years when they don’t. Combine sector bets with diversified equity funds, maintain discipline with SIPs, and always verify current returns before committing.