Investors may be looking to gold and pharma for growth they feel they cannot expect elsewhere. But here's what they must keep in mind.
Can we start investing in gold ETF and pharma funds even at their present levels for short-term profit booking before the fall starts in these two categories?
Oh, your question is full of assumptions about gold and pharma because they have gone up and so, they're bound to fall and this would happen in the short term. I don't know.
For pharma funds, there is a real story that seems to be going on. In fact, there was a big crisis in the pharma sector until recently. Until about 4 years ago, pharma was a long-term winner and thereafter, we came across devastating FDA notices in the Indian pharma sector, which is primarily driven by its overseas sales, particularly in the developed market. The sector was facing the crisis of being marginalised or being completely wiped out in the business. And then, we saw the resurgence, the cleaning up that these businesses undertook by tightening their belts. And things seem to have returned to normalcy.
But I don't know how long it will continue. Let us see the direction of the sector and how regulations, stringent supervision and monitoring would shape up its future. However, the question being raised about the quality standards of Indian pharma companies is not something that could have been fixed overnight. They just don't have a culture of high quality and they don't have the mechanism of capturing the data, storing it, looking at it and complying with the standards in a consistent manner. So, that was the primary complaint about them.
We saw the decline of Ranbaxy in India. The company was first bought by a Japanese company and then, it was bought by Sun Pharma and thereafter, it became a very messy thing. Its production came to a halt due to non-compliance with the FDA rules and there was an embargo on the company. So, let's see how these things pan out in the long term. I think there is learning here. There could be some fixing going on, there could be further changes. So, there are fundamental drivers to this sector that one needs to understand.
With regard to gold, I don't know. I've always thought that it is not an investment rather it is just a store of value. So, be a little careful there. And the best time to invest in anything is not necessarily when it is doing the best. So, keeping that in mind, gold ETFs should be avoided. Wait for your time. The best time to invest in them would have been a year ago or even maybe six months ago. But the best time is not to invest at its all-time high.