What is Capture Ratio?
Capture Ratio measures how much of the benchmark's gains (upside) and losses (downside) a fund participates in. It's split into two numbers:
- Upside Capture: On days when the benchmark goes up, what percentage of that gain does the fund capture? An upside capture of 110% means the fund gains 10% more than the market on up days.
- Downside Capture: On days when the benchmark goes down, what percentage of that loss does the fund suffer? A downside capture of 85% means the fund only loses 85% of what the market loses on down days.
The ideal fund has high upside capture (participates in gains) and low downside capture (protected from losses).
How We Compute It
Downside Capture = (Avg fund return on days benchmark < 0) / (Avg benchmark return on days benchmark < 0) x 100
Both use daily returns (day-over-day NAV percentage change). We separate all trading days into "up days" (benchmark return > 0) and "down days" (benchmark return < 0), then compute the average fund return on each set separately.
SQL (simplified)
-- Inside the risk metrics query:
-- 'paired' CTE has: fund_ret, bench_ret for each day
SELECT scheme_code,
CASE WHEN AVG(bench_ret) FILTER (WHERE bench_ret > 0) > 0
THEN ROUND(
AVG(fund_ret) FILTER (WHERE bench_ret > 0)
/ AVG(bench_ret) FILTER (WHERE bench_ret > 0)
* 100, 2)
ELSE NULL END AS upside_capture,
CASE WHEN AVG(bench_ret) FILTER (WHERE bench_ret < 0) < 0
THEN ROUND(
AVG(fund_ret) FILTER (WHERE bench_ret < 0)
/ AVG(bench_ret) FILTER (WHERE bench_ret < 0)
* 100, 2)
ELSE NULL END AS downside_capture
FROM paired
GROUP BY scheme_code
Worked Example
10 days of daily returns for Fund ABC and the Nifty 50 benchmark:
| Day | Nifty 50 | Fund ABC | Day Type |
|---|---|---|---|
| Mon | +1.20% | +1.35% | Up |
| Tue | -0.80% | -0.60% | Down |
| Wed | +0.50% | +0.70% | Up |
| Thu | +0.90% | +0.85% | Up |
| Fri | -1.50% | -1.20% | Down |
| Mon | +0.30% | +0.45% | Up |
| Tue | -0.40% | -0.55% | Down |
| Wed | +1.80% | +2.10% | Up |
| Thu | -0.70% | -0.50% | Down |
| Fri | +0.60% | +0.40% | Up |
Up days (benchmark > 0):
Nifty avg: (1.20 + 0.50 + 0.90 + 0.30 + 1.80 + 0.60) / 6 = 0.883%
Fund avg: (1.35 + 0.70 + 0.85 + 0.45 + 2.10 + 0.40) / 6 = 0.975%
Down days (benchmark < 0):
Nifty avg: (-0.80 + -1.50 + -0.40 + -0.70) / 4 = -0.850%
Fund avg: (-0.60 + -1.20 + -0.55 + -0.50) / 4 = -0.713%
Fund ABC captures 110% of the market's upside but only 84% of its downside. This is an attractive asymmetry - the fund amplifies gains and cushions losses.
How to Interpret
- Upside > 100, Downside < 100: The sweet spot. Fund outperforms in both directions.
- Upside > 100, Downside > 100: Aggressive fund. Amplifies both gains and losses (high beta).
- Upside < 100, Downside < 100: Defensive fund. Dampens both gains and losses (low beta).
- Upside < 100, Downside > 100: The worst case. Fund misses gains but absorbs full losses.
Capture Ratio vs Beta: Beta tells you the average sensitivity (one number). Capture Ratio separates it into up and down - a fund can have beta of 1.0 but still have asymmetric capture (e.g., 110% up, 90% down) if it performs differently in bull vs bear markets.
Important Notes
- Computed using daily returns over the selected evaluation period.
- Benchmark: Nifty 50 (INDEX_NIFTY50).
- Days where the benchmark return is exactly 0 are excluded from both calculations.
- Minimum 60 daily observations required.
Related metrics
More Risk Metrics methodology from the MFPRO analytics tool: