A suitable index against which the performance of the fund is compared. For example, equity funds benchmark against sensex or nifty index.

Benchmark refers to the standard or yardstick against which the performance of other securities or mutual funds is measured. As per the SEBI guidelines, all fund houses need to mandatorily declare their benchmark index. If a mutual fund delivers a higher return than its benchmark, then it is said to have out-performed. Otherwise, it is a case of under-performance.

They are generally market indices such as Nifty or Sensex. Other benchmarks could be CNX Midcap, CNX Smallcap, etc.

Out-performance of a particular fund= when the fund performs > benchmarked index
Under-performance of a particular fund= when the fund performs < benchmarked index