Standard benchmarks
A fixed, SEBI-specified benchmark for each scheme category — Sensex or Nifty for equity, the 10-year GOI security for most debt schemes — disclosed alongside a scheme's own chosen benchmark for comparison.
In plain language
A scheme picks its own benchmark, tailored to what it invests in. But if every scheme could choose whatever comparator flattered it best, comparing across schemes would be meaningless.
SEBI's answer is a second, standard benchmark laid down for every scheme category, disclosed in addition to the scheme's own chosen benchmark — so every reader of a factsheet or advertisement has at least one common yardstick across an entire category, not just each scheme's preferred comparison.
How it works
The standard benchmarks the workbook lists, by scheme type:
| Scheme type | Standard benchmark |
|---|---|
| Equity scheme | Sensex or Nifty |
| Debt schemes up to 1-year duration, and Arbitrage Funds | 1-year T-Bill |
| All other debt schemes | 10-year dated GoI security |
| Conservative Hybrid Fund | 10-year dated GoI security |
| Balanced Hybrid / Aggressive Hybrid / Dynamic Asset Allocation / Balanced Advantage / Multi Asset Allocation | Sensex or Nifty |
| Equity Savings | 10-year dated GoI security |
| Retirement Fund / Children's Fund | Sensex or Nifty |
| Index Funds / ETFs & FoFs (domestic or overseas) | An appropriate benchmark, based on the same table, matched to the underlying asset allocation |
Schemes must show returns against this standard benchmark in INR and by CAGR, and this disclosure forms part of the Statement of Additional Information and all mutual fund advertisements.
This standard-benchmark disclosure is a separate exercise from the more recent two-tiered benchmarking framework (a category-wide Tier-1 benchmark plus a style-specific Tier-2 benchmark, introduced by SEBI circular in October 2021) — that framework governs the scheme's own primary benchmark, while the standard benchmarks table exists purely so every scheme in a category can be measured against one common, easily available index.
A worked example
A large-cap equity scheme normally benchmarks itself against the Nifty 100, since it invests specifically among large-cap stocks.
Under the standard benchmarks rule, that same scheme's advertisement and its Statement of Additional Information must also disclose its CAGR performance against the Sensex or Nifty — the fixed standard benchmark for all equity schemes — regardless of whether Nifty 100 or Sensex is the scheme's own chosen comparator.
A conservative hybrid fund, by contrast, must disclose its performance against the 10-year dated GoI security as its standard benchmark, even though its own scheme benchmark, being a mix of debt and equity, is likely a blended or synthetic index rather than a pure government-bond yield.
Why NISM asks about it
Chapter 11 (Mutual Fund Scheme Performance) sets out the standard benchmarks table alongside the scheme's own benchmark-selection rules, as part of standardising performance comparison and disclosure. Expect a table-lookup question giving a scheme type and asking for its standard benchmark.
Common exam traps
- Standard benchmarks are disclosed in addition to a scheme's own chosen benchmark, not instead of it.
- Most debt schemes use the 10-year GoI security as the standard benchmark; only short-duration debt schemes and arbitrage funds use the 1-year T-Bill. Mixing up the cut-off between the two is the common trap.
- This is a distinct exercise from the Tier-1/Tier-2 benchmarking framework, which governs the scheme's primary benchmark, not this standardisation disclosure.
- Standard benchmark returns must be shown in INR and by CAGR, matching the format used for the scheme's own performance figures.
Check yourself
1.Against which standard benchmark must an arbitrage fund and a conservative hybrid fund respectively report?
- a)Sensex or Nifty for both
- b)The 1 year T-Bill for the arbitrage fund, and the 10 years dated GoI security for the conservative hybrid fund
- c)The 10 years dated GoI security for the arbitrage fund, and Sensex or Nifty for the conservative hybrid fund
- d)Neither is required to report against a standard benchmark
Show the answer
Answer: (b) The 1 year T-Bill for the arbitrage fund, and the 10 years dated GoI security for the conservative hybrid fund
The standard benchmark table places "All Debt Schemes having duration/maturity UP TO 1 YEAR AND ARBITRAGE FUNDS" against the 1 year T-Bill, and the Conservative Hybrid Fund against the 10 years dated GoI security — alongside "All Debt Schemes which are not covered in point 2" and Equity Savings. The Sensex/Nifty group covers equity schemes, Balanced Hybrid, Aggressive Hybrid, Dynamic Asset Allocation or Balanced Advantage, Multi Asset Allocation, and Retirement and Children's Funds. Note that an arbitrage fund sits with short debt rather than with equity — its return profile, not its instruments, decides the grouping. These standard benchmarks are in addition to the scheme benchmark: "schemes need to disclose return IN INR AND BY WAY OF CAGR for the following benchmarks APART FROM THE SCHEME BENCHMARKS", so as "to bring standardization... as well as comparing the scheme performance with EASILY AVAILABLE INDICES", and "these disclosures shall form part of the STATEMENT OF ADDITIONAL INFORMATION and ALL ADVERTISEMENTS."
Where this is taught
Free preparation for NISM Series V-DRelated terms
- BenchmarkThe independently published index a scheme's performance is measured against, chosen to match its investment objective, asset allocation and strategy, and disclosed in the Scheme Information Document.
- Composite CAGRThe blended CAGR SEBI requires for benchmark comparison when Total Return Index data is not available for the whole period — Price Return Index CAGR up to the date TRI began, spliced with TRI CAGR after it.
- Two-tier benchmarkSEBI's structure giving certain mutual fund schemes two benchmarks: a Tier-1 index standing for the scheme's category, and a Tier-2 index standing for the fund manager's style or strategy within that category.