Key Takeaways
- • Focused mutual funds can hold a maximum of 30 stocks with at least 65% of assets in equities, yet they are typically benchmarked against the Nifty 500 TRI or BSE 500 TRI, an index covering 500 companies, according to Livemint.
- • As of October 22, 2026, per AMFI data, SBI Focused Fund, the category's largest scheme by AUM, returned 4.02% over one year while its benchmark BSE 500 TRI fell 7.95%.
- • HDFC Focused Fund declined 6.56% over the same period, against a 7.64% fall in the Nifty 500 TRI.
- • Experts recommend judging focused funds using downside capture, information ratio, turnover, and comparisons against both the Nifty 500 TRI and a style-specific index such as the Nifty 100 TRI, rather than a single headline benchmark.
Summary
Focused equity mutual funds are schemes that can invest in a maximum of 30 stocks, with at least 65% of assets in equities, and can span large-cap, mid-cap and small-cap stocks. Every active scheme is measured against a benchmark, and focused funds generally use the Nifty 500 TRI or BSE 500 TRI, where TRI (Total Return Index) reflects both price movements and reinvested dividends. Livemint notes that this creates a mismatch: investors are comparing a portfolio of up to 30 stocks with an index representing 500 companies.
According to AMFI data as of October 22, 2026, SBI Focused Fund, the largest scheme in the category by AUM, delivered a one-year return of 4.02%, while its benchmark BSE 500 TRI fell 7.95%. HDFC Focused Fund declined 6.56% while the Nifty 500 TRI fell 7.64%.
Jyoti Bhandari Chandra, Founder of Lovak Capital, said the Nifty 500 TRI or BSE 500 TRI is used because of the category's mandate under SEBI's uniform benchmark framework, under which AMFI assigns a Tier 1 benchmark to each category. Bruce Keith, Co-founder and CEO of InvestorAi, said the index represents the universe from which these funds select stocks. Harsha Vardhana VM, Founder-Group CEO of Atom Financial Services, cautioned that narrower benchmarks could distort results; comparing a mid-cap-heavy fund with the Nifty 50, for example, could make its holdings appear to be bets against the index. He also noted that a 26-holding portfolio may have an active share above 70%, meaning its weights differ substantially from the index, and that such a comparison shows whether the fee was worth paying but not how the manager achieved the result.
On alternatives, Manish P. Hingar, Founder and CEO of Fintoo, said there is no perfect answer: the Nifty 50 is too narrow for many focused funds, while a fully customised benchmark becomes impossible to compare against. Chandra suggested an industry-standard second benchmark mirroring each fund's market-cap mix, alongside the Tier 1 index, as hybrid funds already do with composite benchmarks. Vardhana VM proposed a composite built from the fund's own history; for example, a fund holding about 70% large caps and 30% mid caps could be tested against a blend of 70% Nifty 100 TRI and 30% Nifty Midcap 150 TRI.
For analysis, Vardhana VM advised investors to compare performance against both the Nifty 500 and the relevant style index, noting that the gap between the two is informative. He suggested monitoring downside capture (below 100% indicates the fund fell less than its benchmark in corrections), information ratio (above 0.5 sustained over several years may signal skill), and turnover and cash levels, which may indicate market timing rather than stock selection. He recommended assessing returns over at least three years against both the Nifty 500 TRI and Nifty 100 TRI. Keith emphasised consistency and repeatable monthly relative performance. Hingar advised reviewing three- and five-year rolling returns, alpha, information ratio and downside capture, and checking whether outperformance stems from stock selection or from a sector call or market-cap tilt.
According to AMFI data as of October 22, 2026, SBI Focused Fund, the largest scheme in the category by AUM, delivered a one-year return of 4.02%, while its benchmark BSE 500 TRI fell 7.95%. HDFC Focused Fund declined 6.56% while the Nifty 500 TRI fell 7.64%.
Jyoti Bhandari Chandra, Founder of Lovak Capital, said the Nifty 500 TRI or BSE 500 TRI is used because of the category's mandate under SEBI's uniform benchmark framework, under which AMFI assigns a Tier 1 benchmark to each category. Bruce Keith, Co-founder and CEO of InvestorAi, said the index represents the universe from which these funds select stocks. Harsha Vardhana VM, Founder-Group CEO of Atom Financial Services, cautioned that narrower benchmarks could distort results; comparing a mid-cap-heavy fund with the Nifty 50, for example, could make its holdings appear to be bets against the index. He also noted that a 26-holding portfolio may have an active share above 70%, meaning its weights differ substantially from the index, and that such a comparison shows whether the fee was worth paying but not how the manager achieved the result.
On alternatives, Manish P. Hingar, Founder and CEO of Fintoo, said there is no perfect answer: the Nifty 50 is too narrow for many focused funds, while a fully customised benchmark becomes impossible to compare against. Chandra suggested an industry-standard second benchmark mirroring each fund's market-cap mix, alongside the Tier 1 index, as hybrid funds already do with composite benchmarks. Vardhana VM proposed a composite built from the fund's own history; for example, a fund holding about 70% large caps and 30% mid caps could be tested against a blend of 70% Nifty 100 TRI and 30% Nifty Midcap 150 TRI.
For analysis, Vardhana VM advised investors to compare performance against both the Nifty 500 and the relevant style index, noting that the gap between the two is informative. He suggested monitoring downside capture (below 100% indicates the fund fell less than its benchmark in corrections), information ratio (above 0.5 sustained over several years may signal skill), and turnover and cash levels, which may indicate market timing rather than stock selection. He recommended assessing returns over at least three years against both the Nifty 500 TRI and Nifty 100 TRI. Keith emphasised consistency and repeatable monthly relative performance. Hingar advised reviewing three- and five-year rolling returns, alpha, information ratio and downside capture, and checking whether outperformance stems from stock selection or from a sector call or market-cap tilt.
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