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Sunday, February 21, 2016

MF Benchmarks

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It is mandatory for all funds to select a benchmark based on the investment objective and portfolio. The role of the benchmark is to provide a context for the performance of the fund, as you cannot say how well a fund has performed without also looking at how the market performed during the same period. The benchmark's role is to represent the market and help an investor in his evaluation of the fund. In India, the BSE Sensex and the Nifty are the most widely followed benchmarks for large-cap funds. Other benchmarks are CNX Midcap, CNX Smallcap, CNX IT, CNX 500, BSE 200, BSE 100, etc.
 

Mutual funds have the freedom to change the benchmark if they feel that it doesn't represent their investment universe and strategy.

There have been criticism that funds are opting for the easy way out while choosing a benchmark.

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