Why you should invest in health and wellness sector for improved financial health

You’ve heard it time and again — “Health is wealth.” But as one approaches middle age, this adage becomes more than just a cliché. Rising medical costs, especially due to chronic conditions like diabetes, cardiovascular complications, and lifestyle diseases, begin to weigh heavily on personal finances. These costs also tend to push up health insurance premiums, affecting your financial planning.

But what if you could turn these rising healthcare expenses into an investment opportunity?

As the saying goes, “Peter’s loss is Atul’s gain.” While illness may be a personal financial setback, investing in the health and wellness sector — through sector-specific mutual funds — can allow you to benefit from the very dynamics that are otherwise draining your savings.

Beyond acting as a natural hedge against medical inflation (which in India has historically been twice the rate of overall inflation), here are three compelling reasons why the healthcare sector deserves a dedicated allocation in your investment portfolio:

1. Demographics Are Destiny

Life expectancy in India has more than tripled over the last century and continues to rise. By 2050, 21% of India’s population is projected to be aged 60 and above. This aging demographic will drive demand for healthcare services, creating sustainable long-term business opportunities across pharmaceuticals, diagnostics, home care, and insurance.

2. Healthcare Is a Lifelong Necessity

From infancy to old age, healthcare expenditure is constant — only its nature and size change over life stages. According to BCG, the current decade will see a 34% rise in cardiac and diabetes cases, and a 41% increase in cancer incidence. This realization probably explains why a 2024 McKinsey study found that Indian consumers lead wellness and fitness spending across emerging markets — indicating a societal shift towards preventive care and lifestyle management.

3. A Deep, Diversified, and Growing Investable Universe

The health and wellness sector has expanded beyond traditional pharmaceuticals and hospitals. It now includes Clinical Research Organisations (CROs), Contract Development & Manufacturing Organisations (CDMOs), Medtech, Diagnostics, Insurance, Nutraceuticals, and Fitness brands. Over 100 companies, with a combined market capitalisation of $200 billion, offer a deep and diverse pool of investment — across large-cap, mid-cap, and small-cap segments.

India’s pharmaceutical sector, in particular, highlights the country’s global dominance:

• Supplies 50% of Africa’s generic medicine needs
• Accounts for 40% of generic drugs in the US
• Covers 25% of the UK’s medicine requirements
  
  This leadership is driven by low R&D costs (one-fourth of the US) and manufacturing costs (less than half of the US), ensuring global competitiveness that is unlikely to diminish soon.

Proven Performance

The BSE Healthcare Total Return Index has outperformed the BSE 500 Total Return Index over 1, 3, 7, and 15 years, as the earnings of the healthcare index constituents have outpaced those of the BSE 500 constituents over the past 14 years. This shows that investors with a medium- to long-term investment horizon may find it beneficial to have a satellite allocation to a sector fund betting on this theme.

Conclusion

As medical costs rise, smart investors are turning to the health and wellness sector not just as a hedge, but as a high-growth investment theme. By aligning your portfolio with this essential and ever-expanding sector, you not only safeguard your wealth — you also grow it.

Sanjay Chawla is CIO – Equity, Baroda BNP Paribas Mutual Fund