InvestmentFinancial Glossary
Benchmark Index
Definition
A standard reference point against which the performance of a fund or portfolio is measured. For large-cap equity funds, the benchmark is typically the Nifty 50 Total Return Index. For mid-cap funds, it is the Nifty Midcap 150 TRI. SEBI mandates that all mutual fund schemes declare a benchmark and compare their performance against it.
Why It Matters
If your actively managed fund consistently underperforms its benchmark after fees, you are paying more for worse results than a low-cost index fund. SEBI data shows that over 5-year periods, 60-70% of active large-cap funds fail to beat their benchmark. Always compare your fund's rolling returns against the benchmark before evaluating a fund manager's skill.