The Securities and Exchange Board of India (SEBI) has introduced a two-tiered structure for benchmarking of mutual fund schemes. The move, as part of efforts to improve the standardisation and disclosure levels in the fund management industry, will take effect on January 1, 2022.

What the new guidelines prescribe

Most open-ended mutual fund categories will now have two benchmarks. The first one will reflect the broader category, such as the S&P BSE 100 index or NSE 100 index, for large-cap funds.

The second can be a ‘bespoke’ benchmark, chosen by the asset management company (AMC), according to the investment style/ strategy of the scheme. For instance, for large-cap funds, the AMC can choose the Nifty 50 index as the second benchmark.