A benchmark is a standard against which the performance of a stock or mutual fund can be measured.
The fund houses select benchmark indices on the basis of market capitalisation and sectoral or thematic strategies of the respective funds. Hence, every mutual fund scheme has a corresponding benchmark, against which one can compare the returns to judge its performance against the market. Comparing a fund’s performance with the benchmark tells us whether the fund has outperformed the market or not, across a range of time periods. Outperforming funds provide better returns than the benchmarking value.
Common Benchmarks Used for Different Fund Types
Benchmark
| Focus
| Fund Category
|
Nifty 50 TRI
| Top 50 stocks by market cap
| Large-cap
|
BSE Sensex TRI
| Top 30 stocks by market cap
| Large-cap
|
Nifty 200 TRI
| Top 200 stocks by market cap
| Large and Mid-cap
|
BSE 200 TRI
| Top 200 stocks by market cap
| Large and Mid-cap
|
Nifty Midcap 250
| Top 250 midcap stocks
| Mid-cap
|
Nifty Smallcap 250
| Top 250 smallcap stocks
| Small-cap
|
CRISIL Composite Bond Index
|
| Dynamic Bond Fund
|
CRISIL Short Term Bond Index
|
| Short Term Bond Fund
|
Broad market indices like BSE Sensex, CNX Nifty of the Indian stock market are generally used for comparing the performance of stocks or mutual funds. There are also other indices like Sectoral indices, Thematic indices etc. that are used for benchmarking.
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