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