The basics
What is a benchmark?
A benchmark is the market index a scheme measures itself against, such as the Nifty 100 for a large cap fund or a bond index for a debt fund.
How it works
Every scheme names a benchmark in its documents and shows its returns next to the benchmark's. SEBI requires benchmarks to be total return indices, which include dividends, so the comparison is fair.
For each category AMFI sets a common first-tier benchmark, so funds in the same category can be compared against the same index.
Example
A flexi cap fund that returned 13% a year over five years while its benchmark returned 12% has done 1 percentage point a year better than the index, before you look at risk.
Keep in mind
- Compare returns over the same period and with the same plan.
- Beating the benchmark in one year says little; look at longer and rolling periods.
Questions people ask
Why compare a fund with its benchmark?
It shows how much the fund manager's choices added or took away compared with simply owning the market segment.
What is a total return index?
An index that assumes dividends are reinvested. It is the fair yardstick for a fund, which also reinvests dividends.
Related terms
General information for education, not investment advice or a recommendation of any scheme. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future. Last reviewed 25 October 2026.