On 4 January, the market regulator Securities and Exchange Board of India (Sebi) issued a circular on the benchmarking of mutual funds. According to the circular, mutual funds are required to benchmark the performance of a scheme with the total return variant of the chosen index, also known as the total return index (TRI). Currently, most mutual funds use the price return variant of the index, or price return index (PRI) for benchmarking performance.
After the announcement, some media houses have reported that mutual fund investors could see a reduction in the performance of their investments vis-à-vis the indices they are benchmarked against. Certain reports have also insinuated that exchange-traded funds (ETFs) might turn more attractive than mutual funds. This has led to apprehension among many retail investors about the soundness of their mutual fund investments and whether they should consider switching to ETFs.
