NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Selection
An investor wants to compare a scheme's performance fairly. Which benchmark choice is most appropriate for evaluating a mid cap equity scheme?
A mid cap total return index is the appropriate benchmark, because a scheme must be compared with an index that mirrors its investment universe. A mid cap fund holds mid cap equities, whereas government securities, liquid and gold indices represent different asset classes and give misleading comparisons.
- AA broad government securities index
- BA mid cap total return indexCorrect
- CA liquid fund index
- DThe gold price index
Explanation
A scheme should be compared with a benchmark reflecting its investment universe. A mid cap fund invests in mid cap stocks, so a mid cap index, preferably total return variant including dividends, is appropriate. The other indices represent different asset classes.
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