Mutual Fund
6 questions. Each answer is explained.
Question 1 of 6Practice · Series XXI-B — Portfolio Managers
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Learn these topics
More units in NISM Series XXI-B
- Investment Landscape and Required Return4
- Introduction to Securities Markets and Participants3
- Investing in Stocks and Equity Research7
- Investing in Fixed Income Securities and Bond Valuation6
- Derivatives in Portfolio Management6
- Role of Portfolio Managers in India8
- Operational Aspects of Portfolio Managers (Onboarding and Fees)8
- Portfolio Management Process and Asset Allocation8
- Taxation6
- Regulatory, Governance and Ethical Aspects of Portfolio Managers8
- Introduction to Indices6
- Concept of Informational Efficiency6
- Behavioral Finance6
- Introduction to Modern Portfolio Theory6
- Introduction to Capital Market Theory6
- Risk8
- Equity Portfolio Management Strategies14
- Fixed Income Portfolio Management Strategies14
- Performance measurement and evaluation of Portfolio Managers8
- Portfolio Rebalancing6
Exam format
| Questions | 120 · 1 or 2 marks each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 25% · 0.25 or 0.5 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-B Portfolio Managers
Exam rules read on NISM's site on 30 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 30 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 6 questions on Mutual Fund, with answers
Q1Which feature normally distinguishes an open-ended mutual fund from a closed-ended fund?
Option A. A share price that can never change
Why it is wrong: The value of mutual fund units changes with the portfolio.
Option B. Mandatory exchange sale as the only exit
Why it is wrong: Open-ended funds normally permit redemption with the fund subject to applicable terms.
Option C. A promise that each investment earns a profit
Why it is wrong: An open-ended structure does not guarantee profits.
Option D. Ongoing subscription and redemption with the fund — Correct answer
Answer: D. An open-ended fund normally offers ongoing subscription and redemption under its scheme terms. This describes access to units, not a guarantee of their value. Remember: Open-ended describes the dealing structure rather than investment safety.
Hint, shown before you answer in practice mode: Think about how investors enter and leave the scheme. Common mistake: Confusing ease of redemption with protection against investment losses.
XXI-B-027easyconceptual
Q2What does a systematic investment plan primarily organise for an investor?
Option A. A guaranteed minimum portfolio return
Why it is wrong: Regular contributions do not guarantee a minimum return.
Option B. A fixed number of units in every instalment
Why it is wrong: A fixed cash instalment purchases different units when the unit price changes.
Option C. Automatic removal of equity market risk
Why it is wrong: The underlying assets retain their market risk.
Option D. Investments made at planned regular intervals — Correct answer
Answer: D. A systematic investment plan organises contributions at planned intervals. It does not ensure profit or eliminate the risk of the underlying assets. Remember: Regular investing is a process, not a return promise.
Hint, shown before you answer in practice mode: Separate the payment schedule from the investment outcome. Common mistake: Assuming a regular investment schedule prevents losses.
XXI-B-028easyconceptual
Q3A scheme has assets of ₹10.6 crore, liabilities of ₹0.6 crore and 50 lakh units. What is net asset value per unit?
Option A. ₹21.20
Why it is wrong: This divides gross assets by units without deducting liabilities.
Option B. ₹200
Why it is wrong: This loses a factor of ten when converting crore to lakh.
Option C. ₹20 — Correct answer
Option D. ₹22.40
Why it is wrong: This adds liabilities to assets instead of deducting them.
Answer: C. Net asset value is ₹20 per unit because net assets are ₹10 crore. Net assets = ₹10.6 crore − ₹0.6 crore = ₹10 crore. NAV = ₹10,00,00,000 ÷ 50,00,000 units = ₹20. Remember: NAV per unit is net assets divided by outstanding units.
Hint, shown before you answer in practice mode: Only the net amount belongs to unit holders. Common mistake: Using gross assets or mixing crore and lakh units.
XXI-B-029mediumnumerical
Q4Two otherwise identical portfolios earn the same gross return. What does a higher expense ratio do to investor returns?
Option A. It removes the need to compare gross returns
Why it is wrong: Both investment performance and costs remain relevant to evaluation.
Option B. It reduces the return after expenses — Correct answer
Option C. It raises the return after expenses
Why it is wrong: Expenses reduce rather than increase the amount retained by investors.
Option D. It leaves the return after expenses unchanged
Why it is wrong: The question holds gross performance constant, so different expenses matter.
Answer: B. A higher expense ratio reduces the return after expenses when gross performance is the same. Costs should therefore be considered alongside the investment strategy. Remember: Compare like-for-like returns after the relevant costs.
Hint, shown before you answer in practice mode: Consider which portion of the portfolio’s earnings investors keep. Common mistake: Treating fees as unrelated to the return received by investors.
XXI-B-030mediumconceptual
Q5Which comparison is most meaningful when reviewing an equity scheme’s factsheet?
Option A. Its equity return against an unrelated overnight interest rate
Why it is wrong: An unrelated cash rate does not represent the scheme’s investment opportunity set.
Option B. Its gross return against a peer’s return after fees
Why it is wrong: Different fee treatments prevent a like-for-like comparison.
Option C. Its return against a suitable equity total-return benchmark — Correct answer
Option D. Its best month against another scheme’s full year
Why it is wrong: Different time periods make the comparison misleading.
Answer: C. A suitable equity total-return benchmark gives a more relevant comparison for an equity scheme. The period and treatment of costs must also be clear. Remember: A useful performance comparison needs a relevant and consistently measured benchmark.
Hint, shown before you answer in practice mode: Match the asset class, time period and treatment of costs and distributions. Common mistake: Selecting a comparison merely because it makes the scheme look stronger.
XXI-B-031mediumapplication
Q6Two ₹6,000 instalments buy units at ₹40 and ₹60. Ignoring charges, what is the average acquisition cost per unit?
Option A. ₹50
Why it is wrong: The arithmetic average of unit prices ignores the different quantities purchased.
Option B. ₹52
Why it is wrong: This incorrectly gives greater influence to the higher-price purchase.
Option C. ₹45
Why it is wrong: This does not divide the total investment by the actual total units.
Option D. ₹48 — Correct answer
Answer: D. The average cost is ₹48 per unit because ₹12,000 purchases 250 units. First purchase = ₹6,000 ÷ ₹40 = 150 units. Second purchase = ₹6,000 ÷ ₹60 = 100 units. Average cost = ₹12,000 ÷ 250 = ₹48. Remember: For equal cash instalments, average cost uses total money divided by total units.
Hint, shown before you answer in practice mode: Add the units bought by each instalment before averaging the cost. Common mistake: Averaging the two prices rather than the costs of the units actually bought.
XXI-B-032hardnumerical
Mutual Fund: common questions
How many practice questions are there on Mutual Fund?
6 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 21 practice topics for NISM Series XXI-B, which has 150 questions in total.
Are these real NISM Series XXI-B questions on Mutual Fund?
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-B?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1 or 2-mark question that is 0.25 or 0.5 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 in India
8 questions on Role of Portfolio Managers in India. Its quiz opens on that unit.
Open Role of Portfolio Managers in IndiaPaper Trading Try it on the practice trading desk