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Since the lows of the COVID-19 pandemic, the BSE healthcare index has fared very well. In fact, the pandemic provided a boost.
Once again, the World Health Organisation (W.H.O) declared a world health emergency (on August 14, 2024), amid the outbreak of mpox (formerly called monkeypox) in the Democratic Republic of the Congo and a number of other African nations. This health emergency is of international concern, as per the WHO.
The mpox has 'potential to spread further across countries in Africa and possibly outside the continent,' warns the WHO.
In the case of India, the risk of the spread of mpox is higher than during the COVID-19 pandemic as the travel restrictions have been eased. Delhi, Hyderabad, and a few other cities are popular among African students to pursue higher education.
In light of this, the Ministry of Health and Family Welfare (MoHFW) has asked airports to remain alert (to enhance surveillance and screening). Both the central and state governments have swung into action to be prepared with the healthcare system. Vaccine manufacturers too have begun producing the mpox vaccine to deal with the outbreak.
Currently, there are two vaccines recommended by the WHO’s Strategic Advisory Group of Experts on Immunisation. While these are not available in India, the Serum Institute of India (SII) -- manufacturer of the Covishield vaccine -- is expected to come out soon with its vaccine for mpox, according to the media reports.
The National Institute of Virology, Pune also has been testing the mpox samples since 2022. The MoHFW in 2022 issued an advisory after the outbreak of the clade 2b variant (less severe variant) stating that mpox is a viral zoonotic disease with symptoms similar to smallpox but with less severe clinical outcomes. But now, in 2024, the resurgence of the clade 1b variant (a more severe variant) is the cause of worry.
Against this backdrop, Bandhan Mutual Fund (erstwhile known as IDFC Mutual Fund) has now introduced the Bandhan BSE Healthcare Index Fund. During the New Fund Offer (NFO) period, the scheme is open for subscription from August 21, 2024, to September 3, 2024.
[Read- Best Pharma Mutual Funds: SBI Healthcare Opp Fund vs. ICICI Pru Pharma Healthcare & Diagnostics Fund]
It is an open‐ended equity mutual fund scheme tracking the BSE Healthcare Index.
Around 95%-100% of its total assets will be invested in equity and equity-related securities belonging to the BSE Healthcare Index (including stock and index derivatives).
The exposure to derivatives shall be up to 20% of the equity exposure, and this may be undertaken when equity shares of the underlying index are unavailable or not available in sufficient quantities, subject to the rebalancing period.
Up to 5% of the Scheme’s assets will also be invested in debt & money market instruments. Money Market Instruments include commercial papers, commercial bills, Treasury Bills (T-bills), Government securities (G-Secs) having an unexpired maturity of up to one year, call or notice money, certificate of deposit, Bills Rediscounting, Repos, Triparty Repo, usance bills, and any other like instruments as specified by the Reserve Bank of India from time to time.
Moreover, according to the regulatory guidelines, the Scheme may engage in stock lending. But not more than 20% of the net assets of the Scheme can generally be deployed in stock lending. Furthermore, not more than 5% of the net assets of the Scheme can generally be deployed in stock lending to any single counterparty.
The scheme will not invest in the following securities:
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Credit Default Swaps (CDS)
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Debt instruments having Structured Obligations/Credit Enhancements
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Debt Instruments with Special Features (AT1 and AT2 Bonds)
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Securitized debt instruments
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Repo in corporate debt
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Debt derivatives instruments
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Overseas securities
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Commodity Derivatives
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And REIT & InVIT instrument
Securities in which investment is made to ensure liquidity (debt and money market instruments) are those that fall within the definition of liquid assets which includes cash, G-secs, T-bills, and repo on G-secs.
The allocation to debt & money market instruments is to meet the liquidity requirements of the Scheme and to meet the margin money requirement for BSE Healthcare Index futures and/or futures of stocks belonging to the BSE Healthcare Index.
What is the Investment Objective?
The investment objective of the Bandhan BSE Healthcare Index Fund is to replicate the BSE Healthcare Index by investing in securities of the BSE Healthcare Index in the same proportion/weightage with an aim to provide returns before expenses that track the total return of the BSE Healthcare Index, subject to tracking errors.
However, there is no assurance or guarantee that the objectives of the scheme will be realised, and the scheme does not assure or guarantee any returns.
What is the Investment Strategy?
The corpus of the Scheme, which will be passively managed, will be invested primarily in stocks constituting the respective benchmark of the Scheme i.e. BSE Healthcare Index (Total Return Index).
A portion of the Scheme will be kept liquid to meet the redemption requirements in line with SEBI Regulations.
The performance of the Scheme may not be commensurate with the performance of the respective benchmark of the Schemes on any given day or over any given period. Such variations are commonly referred to as the tracking error.
The stocks comprising the BSE Healthcare Index are periodically reviewed by BSE Indices. A particular stock may be dropped, or new securities may be included as a constituent of the index. In such an event, the Scheme will endeavour to reallocate its portfolio, but the available investment/disinvestment opportunities may not permit precise mirroring of the index immediately.
Similarly, in the event of a constituent stock being demerged/merged/delisted from the exchange, the Scheme will reallocate the portfolio and seek to minimize the variation from the index.
The Scheme intends to maintain a low tracking error by actively managing the portfolio in line with the index.
About the BSE Healthcare Index
The BSE Healthcare Index was launched on February 25, 2022, and is designed to provide investors with a benchmark reflecting companies included in the BSE AllCap that are classified as members of the healthcare sector.
Currently, this Index has 98 constituents with a mean total market capitalisation of Rs 25,941 crore (as of July 31, 2024). The top 10 constituents of the portfolio have a weight of nearly 60%.
Table: Top 10 Constituents of the BSE Healthcare Index
(Source: Bandhan BSE Healthcare Index Fund investor presentation)
The BSE Healthcare Index offers exposure beyond the Rx counter, i.e. hospitals, healthcare research, analytics & technology, medical equipment providers, biotechnology and so on.
In the last decade, the BSE Healthcare Index has created respectable wealth for investors with a Total Return (which accounts for dividends) of 13.3% CAGR, while price returns of 12.6% CAGR (as of July 31, 2024).
Graph: Performance of BSE Healthcare Index Over the Last 5 Years
(Source: https://www.asiaindex.co.in/indices/code/84/)
Over the last 5 years, the compounded annualised Total Return of the BSE Healthcare Index is 26.9%, and price returns of 26.1% CAGR (as of July 31, 2024).
Here’s what Mr Vishal Kapoor, the CEO of Bandha Asset Management Company (AMC), said about the fund launch:
“India’s healthcare industry is globally recognised for vaccine manufacturing, generic drug production, and medical tourism. With the rising prevalence of lifestyle diseases, an ageing population, and increased access to quality healthcare, the sector is poised for significant growth.
The Bandhan BSE Healthcare Index Fund offers investors an opportunity to capitalise on this growth by investing across the entire healthcare spectrum.”
Who Will Manage Bandhan BSE Healthcare Index Fund?
Mr Nemish Sheth is the fund manager of the Scheme. He is an Associate Vice President - Equity at Bandhan AMC. Nemish joined the equity fund management team of Bandhan AMC in November 2021, as was earlier associated with Nippon Life India Asset Management Ltd. as a dealer handling execution of equity, arbitrage and ETF trades.
Before that, he was also associated with ICICI Prudential Asset Management Company Ltd. as a dealer from August 2011 to December 2018 handling execution of Equity, Arbitrage and ETF trades.
Nemish has a total work experience of 12 years and manages various other Index Funds and equity-oriented ETFs at Bandhan Mutual Fund. He is a commerce graduate (B.Com) and holds a post-graduate diploma in management studies with a specialisation in finance (PGDM – Finance).
How much is the Minimum Investment in Bandhan BSE Healthcare Index Fund?
During the NFO period, i.e. from August 21, 2024, to September 3, 2024, the minimum lump sum investment in the Scheme is Rs 1,000/- and in multiples of Re 1/- thereafter.
In the case of SIPs during the NFO period, the minimum instalment is Rs 100/- and in multiple of Re 1/- thereafter (minimum 6 instalments).
In case you are considering STP, the minimum amount for transfer instalments is Rs. 500/- and any amount thereafter.
Both, the Direct Plan and Regular Plan for available for investments. The Scheme offers only the Growth Option, not the IDCW option for investing.
After the NFO period, the scheme will re-open for subscription on September 9, 2024.
Who Should Consider Investing in Bandhan BSE Healthcare Index Fund?
Bandhan BSE Healthcare Index Fund is a passively managed thematic open-ended equity scheme. The investment will be focused on specific industries that are a part of the Healthcare Index.
Therefore, owing to the concentration risk, the fortune of the Scheme will be closely linked to how the underlying index performs. Changes in regulations concerning government policies affecting the sector could have a bearing on the performance of the index. Note, that compared to the other broad-based index, a thematic index tends to be far more volatile.
Currently, the BSE Healthcare Index at a P/E of 45x and P/B of above 6x does not look cheap – these levels are above the long-term averages.
Given this, Bandhan BSE Healthcare Index Fund is suitable for seasoned investors, looking for sector-specific investment opportunities, who have a very high risk appetite and long time horizon (of around 7-8 years or more).
To know more about the Bandhan BSE Healthcare Index Fund read the Scheme Information Document and Key Information Memorandum.
Happy Investing!