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.

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:

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)

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.