Collective Investment Vehicles
8 questions. Each answer is explained.
Question 1 of 8Practice · Series XXI-A — Portfolio Management Services (PMS) Distributors
0 right · 0 wrong · 8 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series XXI-A
- Investments11
- Introduction to Securities Markets7
- Investing in Stocks15
- Investing in Fixed Income Securities8
- Derivatives7
- Role of Portfolio Managers15
- Operational Aspects of Portfolio Managers20
- Portfolio Management Process22
- Performance Measurement and Evaluation of Portfolio Managers15
- Taxation7
- Regulatory, Governance and Ethical Aspects of Portfolio Managers15
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 10% · 0.1 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series XXI-A Portfolio Management Services (PMS) Distributors
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 8 questions on Collective Investment Vehicles, with answers
Q1Which distinction best separates a conventional mutual fund investment from a separately managed PMS portfolio?
Option A. Fund investors hold units in a pool, while PMS holdings are managed for each client’s account. — Correct answer
Option B. Only mutual funds can hold more than one security, so a PMS account holds just one.
Why it is wrong: Both structures can contain diversified portfolios.
Option C. A pooled vehicle like a mutual fund removes all market risk, unlike a PMS account.
Why it is wrong: Pooling does not make the underlying investments risk-free.
Option D. Every PMS client must receive exactly the same return as every other client of that manager.
Why it is wrong: Client timing, restrictions and costs can produce different account returns.
Answer: A. Professional management can be delivered through pooled units or through client-specific portfolio administration. A conventional mutual fund combines investors’ capital and issues units representing interests in that pool. A PMS arrangement manages the particular client’s portfolio under the service agreement. Similar holdings do not make the two structures identical. Remember: Distinguish the vehicle’s ownership structure from its investment strategy.
Hint, shown before you answer in practice mode: Common mistake: Assuming that professional management always means pooled units.
XXI-A-049easyconceptual
Q2In a simplified trust-based mutual fund structure, which pairing correctly distinguishes oversight from day-to-day portfolio management?
Option A. The custodian selects every investment, while trustees execute trades.
Why it is wrong: Safekeeping is not the custodian’s investment-selection role, and trustees do not normally execute portfolio trades.
Option B. The registrar guarantees portfolio returns, while the AMC records investor addresses only.
Why it is wrong: Investor servicing does not guarantee returns, and the AMC’s core role is investment management.
Option C. Each unitholder personally approves every trade, while the AMC only safeguards certificates.
Why it is wrong: That is not the pooled professional-management arrangement described.
Option D. Trustees oversee the fund arrangement, while the AMC manages investments. — Correct answer
Answer: D. Governance, investment management, safekeeping and investor recordkeeping are separate roles in a fund structure. Identify oversight of the arrangement separately from selecting and managing the portfolio. The trustee-AMC pairing makes that distinction. A custody or recordkeeping provider does not take over all those functions. Remember: Map responsibilities before comparing a pooled fund with a PMS organisation.
Hint, shown before you answer in practice mode: Common mistake: Using custodian, trustee, registrar and investment manager as interchangeable titles.
XXI-A-050mediumapplication
Q3A listed investment vehicle mainly holds income-producing commercial real estate through the permitted structure. Which exposure is most relevant when analysing its operating cash flows?
Option A. Only the reported depreciation expense on the buildings
Why it is wrong: A non-cash accounting expense does not by itself establish rent collection or property operating cash flow.
Option B. Property occupancy, rental receipts and leasing conditions — Correct answer
Option C. Only the change in the units’ quoted market price
Why it is wrong: Price changes reflect investor valuations and are not themselves rental cash received by the properties.
Option D. Only the number of times its units trade each day
Why it is wrong: Unit turnover can affect trading liquidity but does not determine property rental receipts.
Answer: B. A real estate investment vehicle provides economic exposure to property assets and their operating cash flows. Look through the listed units to the income-producing assets. Occupancy, rent collection, lease terms and property costs help explain operating cash flows, while market trading characteristics answer a different question. Remember: Analyse the assets generating cash, not merely the legal wrapper or unit price.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a listed property vehicle’s income is fixed or guaranteed.
XXI-A-051easyapplication
Q4An infrastructure trust owns operating toll-road assets through its holding structure. Which development most directly affects the assets’ operating cash flow?
Option A. A sustained change in traffic volume and permitted toll collections — Correct answer
Option B. A change only in the daily secondary-market turnover of the units
Why it is wrong: Trading volume may change unit liquidity without changing toll-road operating receipts.
Option C. A rise in the units’ quoted market price with road operations unchanged
Why it is wrong: A higher market valuation is not an additional toll collection by the road assets.
Option D. A two-for-one split of the trust’s units with no asset change
Why it is wrong: A unit split changes the number of ownership units, not road traffic or toll receipts.
Answer: A. An InvIT’s cash generation should be analysed through the infrastructure business and its contractual or regulated revenue model. The underlying assets are toll roads, so operating receipts depend on relevant traffic and revenue terms. Changes to how an investor holds or views the units are not changes in asset cash generation. Financing and operating costs also matter to distributable cash. Remember: Look through a trust structure to the economic drivers of its infrastructure assets.
Hint, shown before you answer in practice mode: Common mistake: Equating changes in unit presentation with changes in underlying cash generation.
XXI-A-052mediumapplication
Q5A privately pooled investment vehicle states that it invests in young unlisted businesses and expects long holding periods before exits. Which due-diligence question is most relevant?
Option A. Whether the private structure makes company failure irrelevant
Why it is wrong: Business failure can affect a private portfolio as well as a listed one.
Option B. Whether the investor can redeem at a fixed value every day
Why it is wrong: That would need contractual support and conflicts with the illiquid underlying mandate.
Option C. Whether the investor can bear illiquidity and uncertain exit values — Correct answer
Option D. Whether every underlying business has a continuously quoted exchange price
Why it is wrong: The mandate specifically concerns unlisted businesses, so continuous exchange prices should not be assumed.
Answer: C. A private pooled vehicle’s investment mandate can create liquidity and valuation characteristics unlike daily traded listed assets. Identify the underlying stage of business and likely exit process from the mandate. Assess the client’s ability to commit capital and absorb uncertain outcomes. The legal wrapper alone does not resolve those investment risks. Remember: Match a private vehicle’s exit profile to the investor’s constraints.
Hint, shown before you answer in practice mode: Common mistake: Assuming that pooled management makes illiquid assets immediately redeemable.
XXI-A-053mediumapplication
Q6A pooled vehicle has assets worth ₹84 crore, liabilities of ₹4 crore and 4 crore units outstanding. What is its net asset value per unit?
Option A. ₹20 — Correct answer
Option B. ₹80
Why it is wrong: This is the net asset amount in crore, not the value per unit.
Option C. ₹22
Why it is wrong: This adds liabilities instead of deducting them.
Option D. ₹21
Why it is wrong: This divides gross assets by units without deducting liabilities.
Answer: A. Per-unit NAV allocates net assets across the units outstanding at the valuation point. Net assets = ₹84 crore − ₹4 crore = ₹80 crore. NAV per unit = ₹80 crore/4 crore units = ₹20. The crore scale cancels. Remember: NAV uses net assets and the contemporaneous unit count.
Hint, shown before you answer in practice mode: Common mistake: Reporting total net assets instead of the per-unit value.
XXI-A-054easynumerical
Q7An ETF has indicative NAV of ₹50 per unit. The executable ask for the desired purchase quantity is ₹50.40. Ignoring charges, what premium to indicative NAV would the buyer pay?
Option A. 0.40%
Why it is wrong: This treats the rupee difference as a percentage without dividing by the reference value.
Option B. 0.80% — Correct answer
Option C. −0.80%
Why it is wrong: This reverses a premium into a discount.
Option D. 0.79%
Why it is wrong: This uses the transaction price, rather than indicative NAV, as the percentage base.
Answer: B. An ETF’s executable market price can differ from its indicative per-unit asset value. Premium per unit = ₹50.40 − ₹50 = ₹0.40. Premium percentage = ₹0.40/₹50 × 100 = 0.80%. The indicative value is a reference, not a promise that the order executes there. Remember: Use the stated reference base and an executable quote when measuring a trading premium.
Hint, shown before you answer in practice mode: Common mistake: Treating indicative NAV as the guaranteed purchase price.
XXI-A-055mediumnumerical
Q8A fund of funds holds units in other funds. Its factsheet separately states its own operating expense and the expenses embedded in underlying fund NAVs. Which cost review is appropriate?
Option A. Ignore underlying costs because they are not invoiced to the investor.
Why it is wrong: An embedded cost can still reduce the investor’s economic return.
Option B. Add every disclosed percentage without checking its definition.
Why it is wrong: Some reported totals may already include a layer, so blind addition can double count it.
Option C. Consider both layers while checking that the same charge is not counted twice. — Correct answer
Option D. Treat all expenses as optional whenever the holding period is long.
Why it is wrong: A long horizon does not make charged expenses disappear.
Answer: C. A layered investment structure requires a look-through cost review using the definitions of the reported figures. Identify which costs are deducted at the top level and which are embedded in underlying NAVs. Determine whether any displayed total already includes both. Combine only non-overlapping cost measures when an aggregate is needed. Remember: An expense can affect returns even when it is not billed directly to the end investor.
Hint, shown before you answer in practice mode: Common mistake: Ignoring embedded costs or double counting an already consolidated figure.
XXI-A-056mediumapplication
Collective Investment Vehicles: common questions
How many practice questions are there on Collective Investment Vehicles?
8 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 12 practice topics for NISM Series XXI-A, which has 150 questions in total.
Are these real NISM Series XXI-A questions on Collective Investment Vehicles?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series XXI-A?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Role of Portfolio Managers
15 questions on Role of Portfolio Managers. Its quiz opens on that unit.
Open Role of Portfolio Managers