On Thursday, the market watchdog has asked fund houses to benchmark their schemes against total return index or TRI in comparison to the current price return variant of an index or PRI.
The total price index other than dividends or gains in a scheme takes into account scrip changes and hence improves the index value.
With this fund houses shall not be able to extrapolate fund performance and hence make it difficult for them to show outperformance by a higher degree.
Excluding debt schemes, most of the fund schemes are benchmarked against PRI which only takes into capital gains on index constituents.
This has come after the mutual fund house has also classified the schemes in the interest of mutual fund investors. This instruction by the regulator is to enable investors' compare fund performance vis a vis appropriate benchmark.
In a circular SEBI said, strategy of the product, "The performance of the schemes of a mutual fund shall be benchmarked to the Total Return variant of the index chosen as a benchmark". The new norms shall be applicable for all of the schemes from February 1, 2018.
With Inputs From PTI