Healthcare beats Nifty 50: Should investors shift from broader-market index funds to growth sectors?
The healthcare sector has emerged as a strong performer in recent years, suggesting that investors should look beyond traditional broad-market indices.
Data from the Invesco India Pharma and Healthcare Fund NFO presentation shows that the BSE Healthcare TRI has outperformed the broader-market Nifty 50 TRI over the last 10 years.
Since a Total Return Index (TRI) assumes that dividends are reinvested, it provides a more comprehensive measure of an index’s performance.
Here’s what an expert has to say about the sector’s prospects for mutual fund investors.
Why is healthcare becoming a new opportunity for investors?
The healthcare index delivered 12.5% returns over one year, 23% over three years, and 22.7% over seven years, outperforming the Nifty 50 TRI across these periods.
However, over a 10-year period, the two indices delivered broadly similar returns, with the healthcare index at 12.7% and Nifty 50 TRI at 12.3%.
Mayank Jain, Market Analyst, Share.Market by PhonePe, explained that this performance trajectory shows that “healthcare is a cyclical, thematic sector rather than a steady year-on-year compounder”.
He noted that investors should have a long-term horizon to navigate regulatory cycles, export swings, and temporary drawdowns while participating in the sector’s structural growth.
Investors can look at both active healthcare funds and passive funds. Some top performers by 1-year returns include:
- HDFC Pharma and Healthcare Fund: 25.07%
- Kotak Healthcare Fund: 24.25%
- PGIM India Healthcare Fund: 23.79%
In the passive category, options include Nippon India Nifty Pharma ETF, ICICI Prudential Nifty Pharma Index Fund, and Tata Nifty MidSmall Healthcare Index Fund, among others.
(Source: Value Research, returns as on 17 August, not a recommendation)
Why has healthcare performed strongly recently?
The average three-year daily rolling return of the BSE Healthcare TRI was 25.2% as of July 2026, compared with 11.5% for the Nifty 50 TRI.
Jain explained that the performance gap is being supported by several structural factors, including accelerating demand for chronic therapies, expanding domestic healthcare consumption, a global supply chain shift toward India’s CDMO and API manufacturing, and relatively lower valuations following the post-2020 market cycle.
However, investors should also consider the risks. He highlighted the “inherently high concentration risk” in sectoral funds, along with sensitivity to global regulatory developments such as USFDA inspections and the possibility of valuation stretch in mid- and small-cap healthcare stocks.
Should investors replace Nifty 50 funds with healthcare funds?
Out of the 10 calendar-year periods covered, the BSE Healthcare TRI outperformed the Nifty 50 TRI in six periods.
Jain noted that healthcare-focused funds can act as “tactical tools for generating alpha during thematic momentum phases” and are therefore better suited as a satellite portfolio allocation.
He explained that Nifty 50 index investing remains relevant because the index provides exposure to 50 companies across sectors such as financial services, technology, consumer goods and industrials, offering broad diversification.
“Investors can maintain some exposure across different sector funds to pursue alpha generation, but this does not mean the Nifty 50 is outdated. Growth-oriented sectors like healthcare work best as a complement to, rather than a replacement for, core market indices,” he added.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
About the Author
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance.
She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram.
Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
