Although stocks across all sectors have been hammered, these sector-specific funds seem to have attracted lot of investors. This is reflected in the sharp growth in their unit capital (see table). Moreover, after a year of the launch, these pharma funds had disappointed the investors with their performance. However, as the software rally started petering out in March this year, investors were on the lookout for a more stable portfolio, according to a fund analyst. Thanks to this, pharma funds have seen sharp spurt in their unit capital in the past few months.

At the same time, other sector-specific funds like technology and FMCG are not witnessing such fresh fund inflows. On the contrary, most of the technology funds have seen sharp erosion in their initial corpus.

The funds are attracting investors as pharma stocks are more stable compared to other sectors like technology, FMCG, etc., says fund managers. The sector also has high growth potential and leading pharma companies have come out with an impressive show for the second quarter of the current fiscal. Says Mr K K Mittal of Escorts Mutual Fund, ``Pharma business is expected to grow at around 22 per cent in the current fiscal. Indian pharma companies have now started focussing on research and development. Companies like Dr Reddy's Labs and Ranbaxy have done lot of investment in R&D and are on a drive to launch new drugs.''

``During the past two-to-three months, pharma counters have witnessed lot of investment buying. This may be further aided as companies like Glaxo and Pfizer have come out with good quarterly results. Also, pharma stocks are less volatile,'' Mr Mittal adds.

``The current investor interest in pharma funds is also due to the fact that with the deregulation of insurance sector, medical insurance is expected to get a major boost. More people will be able to afford costly medicines which may give a push to toplines of many pharma companies,'' a Delhi-based fund manager says.

The top performer in terms of growth in unit capital is SBI Magnum Pharma. From an initial capital of Rs 2.07 crore, the fund today has a unit capital of Rs 24.99 crore, a growth of 1107 per cent. UTI Pharma's unit capital has seen a growth of 253 per cent and KP Pharma by 90 per cent.

As on August 31, UTI Pharma has an impressive portfolio with 18.58 per cent of its net assets in Ranbaxy, 11.15 per cent in Cipla, 9.24 per cent in Dr Reddy's Lab, 8.4 per cent Hoechst Marion, 8.11 per cent in Novartis, 7.22 per cent in Pfizer and 6.55 per cent in Glaxo.

As on September 30, KP Pharma has 9.71 per cent of its corpus in Hoest Marion, 9.45 per cent in Dr Reddy's, 9.23 per cent in Ranbaxy, 9.01 per cent in Pfizer and 6.83 per cent in Cipla.

As on October 1, SBI Magnum has 9.91 per cent of its net assets in Novartis, 8.64 per cent in Dr Reddy's, 7.83 per cent in Pfizer, 7.01 per cent Hoechst Marion, 6.98 per cent in Ranbaxy and 5.4 per cent in Cipla.