Benchmarking in Mutual Funds
What is a Benchmark in Mutual Funds?
A benchmark is a market index selected to represent the investment universe of a fund and serves as the standard against which the fund’s performance is measured.
Why Should You Compare a Fund to Its Benchmark?
- Performance Evaluation:Comparing fund returns against its benchmark helps determine if the fund manager has added value (outperformed) or underperformed relative to the market segment.
- Risk Assessment:Benchmarks provide context for the fund’s volatility and risk profile (e.g., beta, standard deviation) by relating its movements to those of the chosen index.
Key Equity Fund Categories and Their Benchmarks in India
Fund Categories | Benchmark Index (NSE) |
Large Cap | NIFTY 100 |
Mid Cap | NIFTY Midcap 150 |
Small Cap | NIFTY Smallcap 250 |
Large & Mid Cap | NIFTY LargeMidcap 250 |
IT (Information Technology) equity funds | Nifty IT Index |
Pharma/Healthcare equity funds | Nifty Pharma Index |
