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NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance

Benchmarking and Total Return Index (TRI) for Mutual Funds

Updated 11 October 2026 · Fact-checked

A benchmark is a market index against which a scheme's performance is compared. It should match the scheme's investment universe. A Total Return Index (TRI) counts price changes plus dividends reinvested, while a Price Return Index (PRI) counts only price changes. SEBI requires schemes to compare performance with TRI.

Understand Benchmarking and Total Return Index

A mutual fund return on its own tells you little. If a scheme gave 12% in a year, is that good? It depends on what the market gave. A benchmark is a standard, usually a market index, that you compare the scheme against. If the benchmark gave 10%, the scheme did better. If it gave 15%, the scheme did worse.

The benchmark must be a fair yardstick. It should reflect the scheme's investment universe and style. A large cap equity scheme should be compared with a large cap index, not a small cap index. A liquid fund should be compared with a liquid or money market index, not an equity index. A wrong benchmark gives a misleading picture.

Indices come in two forms. A Price Return Index (PRI) tracks only the change in the prices of the constituent shares. It ignores dividends paid by those companies. A Total Return Index (TRI) assumes that dividends received are reinvested in the index, so it captures price gains plus dividend income.

A mutual fund scheme earns dividends on the shares it holds, and these flow into its NAV. So comparing the scheme with a PRI is unfair, because the index leaves out dividend income. TRI is the like-for-like comparison. For the same period, the TRI return is normally higher than or equal to the PRI return.

SEBI requires schemes to use TRI as the benchmark for performance comparison, and AMFI has set out how benchmarks should be shown. Where a TRI is not available for a given index, the PRI may be used until one is available. For exams, remember the logic: same universe, same style, and dividends included.

Key formulas to remember

TRI versus PRI
TRI return = price return + dividend income reinvested
For the same index and period, TRI return is normally higher than or equal to PRI return.
Excess return over benchmark
Excess return = Scheme return − Benchmark return
Positive means the scheme outperformed. Use the TRI return for the benchmark.
Benchmark selection rule
Benchmark must match the scheme's investment universe, style and asset class
Example: large cap scheme with a large cap index; debt scheme with a debt index.
SEBI requirement
Scheme performance is compared with TRI of the benchmark
If a TRI is not available for an index, PRI may be used until a TRI is available.

How to solve Benchmarking and Total Return Index questions

Use this method for any question on benchmarks, PRI and TRI.

  1. 1Read what the scheme invests in: asset class, market capitalisation, sector or theme.
  2. 2Pick the index that mirrors that universe. Reject indices of a different asset class or size.
  3. 3Check whether the question asks for PRI or TRI. Remember that TRI includes reinvested dividends.
  4. 4If numbers are given, make sure you use the same period and the same type of return for scheme and benchmark.
  5. 5Compute excess return as scheme return minus benchmark return.
  6. 6Interpret the sign: positive means outperformance, negative means underperformance.
  7. 7Check the options for traps such as a PRI used for comparison or a mismatched index.

Quickest way: Match the universe, then check dividends

When to use it: Use for MCQs that ask which benchmark suits a scheme or why TRI is preferred.

  1. Name the scheme's asset class and size in one phrase.
  2. Choose the option with an index of that same type.
  3. If the question is about PRI versus TRI, pick the answer that says TRI includes dividends.
  4. For return gaps, subtract benchmark from scheme and read the sign.

Common mistakes in Benchmarking and Total Return Index

  • Saying PRI includes dividends

    The names sound similar and students confuse which one is 'total'.

    Fix: Remember: Total Return = price plus dividends. Price Return = price only.

  • Choosing a broad market index for a sector or small cap scheme

    Students pick the most famous index.

    Fix: Match the index to the scheme's actual universe and style.

  • Comparing a scheme's return with PRI

    PRI figures are widely quoted in news.

    Fix: The scheme's NAV reflects dividends, so the fair comparison is TRI.

  • Thinking TRI is always much higher than PRI

    Students overstate the gap.

    Fix: TRI is normally higher than or equal to PRI. The gap depends on the dividends paid, so it is usually modest.

  • Treating a benchmark as a guarantee or target the fund must hit

    Benchmark sounds like a promise.

    Fix: A benchmark is only a reference for comparison. It does not guarantee returns.

Worked examples

Example 1

A scheme returned 11.5% in a year. Its benchmark PRI returned 9.0% and the benchmark TRI returned 10.2%. By how much did the scheme outperform on the correct comparison?

Show the solution
  1. The correct comparison for a scheme is with TRI, because TRI includes reinvested dividends.
  2. Scheme return = 11.5%. Benchmark TRI return = 10.2%.
  3. Excess return = 11.5% − 10.2% = 1.3%.

Answer: The scheme outperformed its TRI benchmark by 1.3 percentage points. Comparing with PRI would wrongly show 2.5 percentage points.

Example 2

Which benchmark is most appropriate for a mutual fund scheme that invests mainly in large cap equity shares: a small cap equity index, a large cap equity index, a liquid fund index, or a government securities index?

Show the solution
  1. Identify the scheme's universe: large cap equity shares.
  2. Reject the liquid fund index and the government securities index, because they represent debt and money market assets.
  3. Reject the small cap index, because it represents a different market capitalisation segment.
  4. The large cap equity index matches both asset class and size.

Answer: A large cap equity index, preferably its Total Return Index version.

Exam tips

  • Expect a direct definition question: TRI includes dividends reinvested, PRI does not.
  • In benchmark selection questions, eliminate options by asset class first, then by size or theme.
  • Watch for options that compare a scheme with PRI. These are usually the trap.
  • Remember that a benchmark is a yardstick, not a guarantee of returns.

Practice questions from Mutual Fund Scheme Performance

Benchmarking and Total Return Index: frequently asked questions

What is Total Return Index (TRI) in mutual funds?

TRI is an index that measures returns from both price changes and dividends, with dividends assumed to be reinvested in the index. It gives a fuller picture of what the market delivered. Schemes are compared against it.

What is the difference between PRI and TRI?

PRI tracks only price movements of the index constituents. TRI adds the dividends received and reinvested. For the same period, TRI return is normally higher than or equal to PRI return.

Why does SEBI require TRI for benchmarking?

A scheme's NAV includes the dividends earned on its holdings. To compare fairly, the benchmark must also include dividends. TRI does this, so it avoids understating the benchmark's return.

How do I choose a benchmark for a scheme?

Pick an index that reflects the scheme's asset class, market capitalisation and style or theme. A debt scheme needs a debt index and a large cap scheme needs a large cap index. The benchmark is stated in the scheme documents.