Mutual Fund Products
22 questions. Each answer is explained.
Question 1 of 10Practice · Series V-A — Mutual Fund Distributors
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Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series V-A Mutual Fund 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 22 questions on Mutual Fund Products, with answers
Q1A large-cap fund has total assets of ₹250 crore. Under SEBI’s February 2026 categorisation, what minimum amount must normally be invested in equity and equity-related instruments of large-cap companies?
Option A. ₹250 crore
Why it is wrong: This assumes a 100% requirement. A minimum of 80% does not require every rupee to be invested in large-cap equity.
Option B. ₹200 crore — Correct answer
Option C. ₹162.50 crore
Why it is wrong: This uses 65%, not the 80% minimum for the large-cap category.
Option D. ₹187.50 crore
Why it is wrong: This applies 75%. A familiar equity percentage from another category cannot replace the large-cap rule.
Answer: B. 80% of total assets is ₹250 crore × 0.80 = ₹200 crore. The February 2026 category table sets the large-cap minimum at 80% of total assets. Required amount = total assets × minimum percentage = ₹250 crore × 80 ÷ 100. The result is ₹200 crore. This is a floor, not a requirement to hold exactly that amount. Remember: Apply the specified category percentage to total assets and distinguish a minimum from an exact allocation.
Hint, shown before you answer in practice mode: Common mistake: Using another category’s percentage or treating the minimum as a 100% investment requirement.
VA-007mediumnumerical
Q2A company is ranked 250th in the applicable list based on full market capitalisation. For mutual fund categorisation, it falls in which segment?
Option A. Large cap
Why it is wrong: The large-cap band ends at rank 100, not rank 250.
Option B. Small cap
Why it is wrong: The small-cap band begins at rank 251. Moving the boundary back by one rank misclassifies this company.
Option C. Unclassified until its free-float rank is known
Why it is wrong: The classification uses full market capitalisation. A separate free-float ranking is not needed for this question.
Option D. Mid cap — Correct answer
Answer: D. The mid-cap band includes ranks 101 through 250, so the endpoint belongs to that band. Use the applicable classification list, rather than an intraday change in a share price. The mid-cap definition covers the 101st through the 250th companies by full market capitalisation. Rank 250 is the last rank in the mid-cap band. The next rank, 251, begins the small-cap band. Remember: Remember both the inclusive boundaries and the full-market-cap basis of classification.
Hint, shown before you answer in practice mode: Common mistake: Confusing full market capitalisation with free-float market capitalisation, or excluding rank 250 from mid caps.
VA-008easyregulatory
Q3An investor has three ELSS unit allotments from SIP instalments. On the proposed redemption date, the first has completed three years, the second two years and the third one year. Which can be redeemed under the ordinary lock-in rule?
Option A. Only the first allotment — Correct answer
Option B. All three allotments
Why it is wrong: The first SIP date does not start one shared lock-in clock for all future units.
Option C. The first and second allotments
Why it is wrong: Two years is insufficient for the second allotment, even though the SIP began earlier.
Option D. None until three years after the final allotment
Why it is wrong: The last instalment does not restart the lock-in on units allotted earlier.
Answer: A. Only these units have completed their own three-year lock-in. Identify how long each allotment has been held. The three allotments have completed three, two and one year respectively. The ordinary ELSS lock-in is three years. Only the first allotment has met that duration. The later units remain locked for their own remaining periods. The investor may also continue holding the first allotment instead of redeeming it. Remember: For ELSS SIPs, check the three-year clock separately for each unit allotment.
Hint, shown before you answer in practice mode: Common mistake: Assuming that all SIP units become redeemable when the first instalment completes three years.
VA-009mediumapplication
Q4An SWP pays ₹6,000 each month. The applicable NAV is ₹30 for one withdrawal and ₹24 for the next. Ignoring loads and taxes, how many units are redeemed for the two withdrawals, respectively?
Option A. 200 units and 250 units — Correct answer
Option B. 200 units and 200 units
Why it is wrong: The first count is right, but 200 units at ₹24 would provide only ₹4,800 for the second withdrawal.
Option C. 250 units and 200 units
Why it is wrong: The counts are reversed. A lower NAV requires more units for the same cash amount.
Option D. 200 units and 160 units
Why it is wrong: This reduces the second unit count by the 20% fall in NAV. For a fixed cash withdrawal, units move inversely to NAV, not in the same direction.
Answer: A. ₹6,000 ÷ ₹30 = 200 units and ₹6,000 ÷ ₹24 = 250 units. Units redeemed = withdrawal amount ÷ applicable NAV per unit. First withdrawal: ₹6,000 ÷ ₹30 per unit = 200 units. Second withdrawal: ₹6,000 ÷ ₹24 per unit = 250 units. The lower NAV requires 50 more units to generate the same ₹6,000. The cash can include the investor’s capital, not just investment gains. Remember: A fixed-amount SWP sells more units when NAV is lower.
Hint, shown before you answer in practice mode: Common mistake: Treating SWP cash as interest income or assuming that the same number of units is redeemed every month.
VA-015mediumnumerical
Q5An STP between two schemes of the same mutual fund redeems a gross value of ₹24,000 from the source scheme at NAV ₹12. For this question, a 1% exit load is deducted from that value. The entire balance buys destination units at NAV ₹24. Ignoring all other taxes and charges, how many destination units are allotted?
Option A. 990 units — Correct answer
Option B. 2,000 units
Why it is wrong: This is the number of source units redeemed. Source units are not moved unchanged into the destination scheme.
Option C. 1,980 units
Why it is wrong: This divides the net proceeds by the source NAV of ₹12 instead of the destination NAV of ₹24.
Option D. 1,000 units
Why it is wrong: ₹24,000 ÷ ₹24 ignores the stated ₹240 exit load on the source redemption.
Answer: A. The transferable amount is ₹24,000 − ₹240 = ₹23,760. Dividing by destination NAV ₹24 gives 990 units. Source units redeemed = ₹24,000 ÷ ₹12 = 2,000 units. The instruction specifies gross redemption value, not net transfer value. Hypothetical exit load = ₹24,000 × 1% = ₹240. Amount available for the destination purchase = ₹24,000 − ₹240 = ₹23,760. Destination units = ₹23,760 ÷ ₹24 = 990 units. The source and destination unit counts need not be equal. Remember: Convert the source redemption into net cash before dividing by the destination NAV.
Hint, shown before you answer in practice mode: Common mistake: Ignoring the source exit load or using the source NAV for the destination allotment.
VA-016hardnumerical
Q6Which objective best describes a conventional index fund?
Option A. Outperform its benchmark through discretionary security selection.
Why it is wrong: Discretionary selection to generate excess return describes active management.
Option B. Seek to replicate the performance of a specified index. — Correct answer
Option C. Change its equity exposure mainly through short-term market forecasts.
Why it is wrong: Forecast-driven changes in equity exposure are not the defining replication objective.
Option D. Maintain equal weights in all holdings regardless of index weights.
Why it is wrong: Equal weighting is appropriate only when required by the chosen index methodology.
Answer: B. The specified index is the performance target that the fund seeks to follow. The index determines the reference portfolio or exposure that the fund seeks to track. Implementation costs and other practical factors can produce a difference between fund and benchmark returns. Replication is an objective, not a claim of perfect equality. Remember: For an index fund, judge implementation against its stated index-tracking objective.
Hint, shown before you answer in practice mode: Common mistake: Assuming that passive management either guarantees identical returns or means equal-weighted holdings.
VA-025easyconceptual
Q7A multi-cap fund has total assets of ₹400 crore: large-cap equity ₹160 crore, mid-cap equity ₹80 crore, small-cap equity ₹60 crore and other permitted assets ₹100 crore. Under SEBI’s February 2026 categorisation, what minimum amount must move from large caps to mid and small caps to meet their category floors? Assume unchanged asset values and no costs.
Option A. ₹60 crore — Correct answer
Option B. ₹20 crore
Why it is wrong: This fills only the mid-cap shortfall and leaves small caps below their minimum.
Option C. ₹40 crore
Why it is wrong: This fills only the small-cap shortfall and leaves mid caps below their minimum.
Option D. ₹0 crore
Why it is wrong: Total equity is already 75%, but that does not satisfy the separate 25% minimum in each market-cap segment.
Answer: A. Each segment needs ₹100 crore. Mid caps need ₹20 crore and small caps ₹40 crore, totalling ₹60 crore. The category requires at least 75% in equity and equity-related instruments, including at least 25% of total assets in each of the three segments. Each segment’s floor is ₹400 crore × 25% = ₹100 crore. Mid-cap shortfall = ₹100 crore − ₹80 crore = ₹20 crore. Small-cap shortfall = ₹100 crore − ₹60 crore = ₹40 crore. Move ₹20 crore and ₹40 crore respectively from large caps. Large caps then equal ₹160 crore − ₹60 crore = ₹100 crore. The final allocations are ₹100 crore each in large, mid and small caps. They total ₹300 crore, or 75% of the unchanged ₹400 crore assets. Remember: Meeting a total equity floor does not automatically meet every sub-category floor.
Hint, shown before you answer in practice mode: Common mistake: Checking only the 75% equity total while overlooking the three separate 25% requirements.
VA-033hardnumerical
Q8Under SEBI’s February 2026 categorisation, which focused-fund portfolio meets BOTH the normal equity-allocation minimum and the maximum number of stocks? Percentages are of total assets.
Option A. 30 stocks with 65% in equity and equity-related instruments
Why it is wrong: The stock count is within the limit, but the February 2026 category table requires at least 80%, not 65%.
Option B. 28 stocks with 82% in equity and equity-related instruments — Correct answer
Option C. 40 stocks with 95% in equity and equity-related instruments
Why it is wrong: A high equity allocation does not excuse exceeding the 30-stock maximum.
Option D. 35 stocks with 80% in equity and equity-related instruments
Why it is wrong: The equity percentage is sufficient, but 35 stocks exceeds the maximum of 30.
Answer: B. This answer is within the 30-stock maximum and above the 80% equity minimum. The February 2026 table specifies no more than 30 stocks for a focused fund. It also sets an equity and equity-related allocation of at least 80% of total assets. The portfolio with 28 stocks and 82% equity meets both tests. Each other portfolio fails at least one. Remember: Check every category condition, and use the specified regulatory version rather than a remembered older percentage.
Hint, shown before you answer in practice mode: Common mistake: Remembering the 30-stock limit but carrying forward the older 65% equity figure.
VA-034mediumregulatory
Q9Under SEBI’s February 2026 categorisation, what is the maximum remaining maturity of a debt or money-market security eligible for a liquid fund, considering the maturity condition alone?
Option A. 30 days
Why it is wrong: This is shorter than the category limit and would incorrectly exclude otherwise eligible securities with 31–91 days remaining.
Option B. 180 days
Why it is wrong: A security with 180 days remaining exceeds the liquid-fund maturity limit.
Option C. 91 days — Correct answer
Option D. 365 days
Why it is wrong: A one-year remaining maturity is outside the liquid-fund category condition.
Answer: C. The liquid-fund category specifies debt and money-market securities maturing within 91 days. Identify the scheme as a liquid fund, rather than another short-maturity debt category. The February 2026 table allows debt and money-market securities with maturity up to 91 days. This answer addresses only maturity. A security must still satisfy any other applicable investment and eligibility rules. Remember: Do not substitute a portfolio average for a maturity ceiling on eligible securities.
Hint, shown before you answer in practice mode: Common mistake: Assuming a longer-dated security is acceptable simply because shorter holdings pull down the average maturity.
VA-035easyregulatory
Q10Which allocation meets an aggressive hybrid fund’s normal equity and debt bands under SEBI’s February 2026 categorisation? Each pair shows equity followed by debt, as a percentage of total assets.
Option A. 60% equity and 40% debt
Why it is wrong: Equity is below the 65% floor and debt is above the 35% ceiling.
Option B. 85% equity and 15% debt
Why it is wrong: Equity exceeds 80% and debt is below 20%.
Option C. 20% equity and 80% debt
Why it is wrong: These proportions reverse the equity-heavy character of an aggressive hybrid fund and fall outside both bands.
Option D. 70% equity and 30% debt — Correct answer
Answer: D. Equity is within 65%–80% and debt is within 20%–35%. For an aggressive hybrid fund, the stated normal equity band is 65%–80% of total assets. The debt band is 20%–35% of total assets. The 70%/30% pair falls inside both bands. Testing only one asset class can miss a breach of the other band. Remember: Check both the equity and debt bounds before identifying a hybrid category.
Hint, shown before you answer in practice mode: Common mistake: Treating every mix of equity and debt as an aggressive hybrid fund.
VA-036mediumregulatory
Q11An investor puts ₹10,000 into an NFO at ₹10 per unit and another ₹10,000 into an existing scheme at NAV ₹50. Assume both unit values subsequently rise by exactly 10%, with no distributions or charges. What are the two investment values then?
Option A. ₹11,000 in the NFO and ₹10,200 in the existing scheme
Why it is wrong: The existing scheme’s NAV rises by 10% of ₹50, or ₹5, not by the NFO’s ₹1 per-unit increase.
Option B. ₹15,000 in the NFO and ₹11,000 in the existing scheme
Why it is wrong: This gives the NFO the existing scheme’s ₹5 per-unit increase. The assumed 10% rise means different rupee increases from different starting NAVs.
Option C. ₹10,100 in each scheme
Why it is wrong: This treats 10% as 1% when applied to the invested ₹10,000. A 10% gain on ₹10,000 is ₹1,000.
Option D. ₹11,000 in each scheme — Correct answer
Answer: D. The investor holds 1,000 NFO units worth ₹11 each and 200 existing-scheme units worth ₹55 each. Both holdings are ₹11,000. Units allotted in the NFO are ₹10,000 / ₹10 = 1,000. Units in the existing scheme are ₹10,000 / ₹50 = 200. After the assumed 10% rise, the respective unit values are ₹10 × 1.10 = ₹11 and ₹50 × 1.10 = ₹55. Final values are 1,000 × ₹11 = ₹11,000 and 200 × ₹55 = ₹11,000. The lower starting unit price produces more units, not a larger percentage return on the same capital. Equal returns here are a supplied assumption, not a forecast for two actual schemes. Remember: Compare percentage returns and scheme characteristics, not unit counts or the face value of an NFO.
Hint, shown before you answer in practice mode: Common mistake: Treating more units at a lower NAV as an automatic economic advantage.
VA-064mediumnumerical
Q12A fund of funds has 60% of its assets in Fund P, 30% in Fund Q and 10% in cash. P has 80% equity exposure and Q has 40%, each measured on its own assets. With no leverage or other equity exposure, what is the FoF’s look-through equity exposure?
Option A. 90%
Why it is wrong: 90% is the allocation to underlying funds, not their combined equity exposure. Both underlying funds also contain non-equity assets.
Option B. 66.67%
Why it is wrong: 66.67% divides the 60% equity exposure by the 90% invested in funds. The question asks for exposure as a share of all FoF assets, including cash.
Option C. 48%
Why it is wrong: This reverses the FoF’s weights in P and Q: 30% × 80% + 60% × 40% = 48%. The stem gives 60% in P and 30% in Q.
Option D. 60% — Correct answer
Answer: D. The two weighted equity contributions are 48% and 12%, totalling 60%. Fund P contributes 60% × 80% = 48% of the FoF’s assets as equity exposure. Fund Q contributes 30% × 40% = 12%. The FoF’s own 10% cash contributes no equity exposure. Total equity exposure = 48% + 12% = 60% of total FoF assets. This is an economic exposure calculation. It does not determine the scheme’s legal category or its tax classification. Remember: Look through every layer of fund ownership and keep the denominator as total FoF assets.
Hint, shown before you answer in practice mode: Common mistake: Treating all money invested in underlying funds as equity or excluding the FoF’s cash from the denominator.
VA-082hardnumerical
Q13An ETF has an indicative NAV of ₹100. Its best bid is ₹99.60 and best ask is ₹100.40, with sufficient quantity at both prices. An investor buys 100 units at the ask and immediately sells 100 at the unchanged bid. Ignoring all charges, what is the round-trip result?
Option A. A loss of ₹80 — Correct answer
Option B. A loss of ₹40
Why it is wrong: ₹40 counts only the purchase price’s ₹0.40 premium over indicative NAV and ignores the sale below it.
Option C. No gain or loss
Why it is wrong: An unchanged indicative NAV does not remove the difference between the two execution prices.
Option D. A gain of ₹80
Why it is wrong: A gain would require buying at the bid and selling at the ask. The investor is taking the opposite sides.
Answer: A. Buying at the ask and selling at the bid produces a ₹0.80 loss on each of 100 units. The purchase costs 100 × ₹100.40 = ₹10,040. The sale receives 100 × ₹99.60 = ₹9,960. Net result = ₹9,960 − ₹10,040 = −₹80. The round trip crosses the full ₹0.80 spread per unit. The indicative NAV is a reference value, not an offered trade price in this example. Remember: For an ETF trade, use the actual execution prices rather than substituting indicative NAV.
Hint, shown before you answer in practice mode: Common mistake: Counting only one half of the spread or assuming every ETF trade executes at NAV.
VA-083mediumnumerical
Q14A listed close-ended fund has NAV ₹18 and an available exchange buying quote of ₹16.80. It offers no repurchase facility before maturity. An investor needs to exit now. Which statement is correct?
Option A. The AMC must redeem the units at ₹18 on request.
Why it is wrong: This imposes open-ended-style redemption on a scheme for which the stem excludes that facility.
Option B. An exchange sale must use the published NAV as its execution price.
Why it is wrong: A published NAV is not a requirement that a secondary-market buyer must execute at that price.
Option C. The exchange purchase quote determines the NAV used for all scheme accounting.
Why it is wrong: The unit’s market quotation and the NAV computed from the underlying portfolio are different measures.
Option D. The investor may sell at an executable market price, which can differ from NAV. — Correct answer
Answer: D. An exchange sale can occur at a discount or premium to NAV, subject to available trading liquidity. The stem explicitly excludes a repurchase facility before maturity. The available exit is an exchange sale if a buyer and sufficient quantity are available. The exchange price reflects the available order, not a compulsory NAV payment by the AMC, exchange or custodian. Remember: Check the scheme’s redemption terms separately from whether its units are listed.
Hint, shown before you answer in practice mode: Common mistake: Assuming listing guarantees exit at the latest NAV.
VA-084easyapplication
Q15A scheme permits purchases and repurchases with the fund only during specified recurring transaction periods rather than on every business day. Which structure does this describe?
Option A. An open-ended scheme
Why it is wrong: The specified recurring windows differ from the ordinary continuous purchase and repurchase facility of an open-ended structure.
Option B. A close-ended scheme with no periodic repurchase facility
Why it is wrong: The alternative explicitly has no periodic repurchase facility, whereas the described scheme does.
Option C. An interval scheme — Correct answer
Option D. An exchange-traded fund with continuous exchange trading
Why it is wrong: Continuous exchange trading is a different transaction mechanism from the specified fund-level windows.
Answer: C. Transactions with the fund at stated recurring intervals are the identifying feature. The key feature is recurring transaction windows for purchases and repurchases with the fund. That feature describes an interval structure. A close-ended fund with no such facility does not offer these recurring windows. The question concerns transactions with the fund. It does not equate those windows with exchange trading or make a general claim about whether interval units are listed. Remember: Distinguish continuous fund transactions, specified interval windows and secondary-market exchange trading.
Hint, shown before you answer in practice mode: Common mistake: Treating the ability to transact only at stated intervals as the same thing as daily dealing.
VA-085easyconceptual
Q16An investor wants a mutual fund to remove one company only from the portfolio supporting his units, without changing the scheme’s other investors’ holdings. Which statement best explains the limitation?
Option A. The scheme has a common portfolio, not a separately customised portfolio for each unitholder. — Correct answer
Option B. A direct plan automatically provides a different security portfolio for each investor.
Why it is wrong: A direct plan changes the distribution arrangement, not the investor’s power to choose a personal list of portfolio securities.
Option C. Opening a second folio allows the investor to exclude individual securities from the scheme.
Why it is wrong: A second folio is another investor account. It does not divide the scheme into individually tailored securities portfolios.
Option D. Choosing the growth option allows the investor to select the scheme’s underlying companies.
Why it is wrong: Growth concerns how the investment option handles distributions. It does not delegate stock selection to each unitholder.
Answer: A. The common portfolio explains why ordinary units cannot be customised in the way requested. The investor owns units that participate in the common scheme portfolio. A request to remove a particular security only for that investor would require a separate individual mandate rather than ordinary pooled units. A direct plan, an additional folio or a growth option does not give the unitholder stock-by-stock control of the common portfolio. Remember: Distinguish selecting a suitable pooled scheme from directing a personalised portfolio inside it.
Hint, shown before you answer in practice mode: Common mistake: Treating a folio, plan or distribution option as a separate discretionary investment mandate.
VA-094easyconceptual
Q17An index selects shares using published value and quality scores and rebalances under a stated rule. A fund seeks to track that index rather than make discretionary stock selections. Which description fits best?
Option A. A rules-based factor-index approach — Correct answer
Option B. A discretionary stock-picking approach
Why it is wrong: The stem explicitly says the fund tracks an index rather than making discretionary stock selections.
Option C. A market-cap-only weighting approach
Why it is wrong: A market-cap-only approach would not use the stated value and quality selection scores as its defining process.
Option D. A capital-protection approach
Why it is wrong: No mechanism protecting the amount invested is described. A selection methodology is not capital protection.
Answer: A. The published factor scores and rebalancing rules match a rules-based factor-index approach. The selection process uses specified value and quality scores rather than only company size. The fund aims to track the resulting index, not choose shares through an unrestricted manager view. Those features describe a rules-based factor or smart-beta approach. They do not establish superior performance or capital protection. Remember: Look at how the index is constructed, not only whether the fund is called passive.
Hint, shown before you answer in practice mode: Common mistake: Assuming every index-following strategy is based solely on full market capitalisation.
VA-110easyapplication
Q18A hypothetical arbitrage trade buys 1,000 shares at ₹500 each and shorts futures on the same 1,000 shares at ₹508. At expiry, both prices are ₹480. Total financing and trading costs are ₹4,000. Ignoring taxes and all other cash flows, what is the combined net result?
Option A. A loss of ₹24,000
Why it is wrong: This counts the cash-position loss and costs but omits the offsetting ₹28,000 futures gain.
Option B. A profit of ₹24,000
Why it is wrong: This subtracts costs from the futures gain but omits the ₹20,000 loss on the shares.
Option C. A profit of ₹8,000
Why it is wrong: This is the combined gross profit before the stated ₹4,000 cost deduction.
Option D. A profit of ₹4,000 — Correct answer
Answer: D. Both legs together earn ₹8,000 gross, and the stated costs reduce that to ₹4,000 net. Cash position result = 1,000 × (₹480 − ₹500) = −₹20,000. Short-futures result = 1,000 × (₹508 − ₹480) = +₹28,000. A short position gains when its settlement price is below its entry price. Combined gross result = −₹20,000 + ₹28,000 = ₹8,000. Net result = ₹8,000 − ₹4,000 = ₹4,000 profit. Equivalently, the ₹8 initial spread across 1,000 matched shares produces ₹8,000 before the given costs. Remember: Combine both legs before deducting costs. A loss on the shares alone does not describe the matched trade.
Hint, shown before you answer in practice mode: Common mistake: Treating the cash and futures positions as separate winning or losing trades rather than calculating their combined result.
VA-111hardnumerical
Q19A thematic fund holds companies from construction, power equipment and cement because all are linked to infrastructure spending. Which conclusion is best supported by this description?
Option A. The holdings make it a single-industry sector fund
Why it is wrong: The stated portfolio covers construction, power equipment and cement. Calling it one industry ignores the cross-industry theme.
Option B. Different industry labels remove the shared demand risk
Why it is wrong: Different industry labels do not remove their common dependence on infrastructure spending.
Option C. The holdings span industries but retain exposure to a common theme — Correct answer
Option D. The holdings must have the same risk as a broad-market index
Why it is wrong: No broad-market portfolio weights or risk evidence are supplied. Theme concentration cannot simply be equated with a broad index.
Answer: C. This captures both features: multiple industries and a shared infrastructure-related driver. The companies belong to different industries, so the description is broader than one narrowly defined industry. All were selected for their link to infrastructure spending. A slowdown in that spending can affect several holdings together. The number of industry labels therefore does not establish broad-market diversification or eliminate common-theme exposure. Remember: Examine the common economic driver as well as the industry names when assessing diversification.
Hint, shown before you answer in practice mode: Common mistake: Counting industry labels without checking whether the holdings depend on the same underlying demand source.
VA-112mediumapplication
Q20A perpetual bond held by a fund has no contractual maturity date. Its issuer may first call it after five years, but is not required to do so. Which interpretation of that five-year date is correct?
Option A. It is the date on which investors can demand repayment
Why it is wrong: A right for investors to demand repayment would be a put or other contractual right. None is stated.
Option B. It is the date on which the bond must be sold by the fund
Why it is wrong: A first call date does not itself impose a sale instruction on the fund.
Option C. It is a fixed maturity date subject only to payment processing
Why it is wrong: This converts the issuer’s optional action into a compulsory maturity, contrary to the stated terms.
Option D. It is an issuer option date, not assured repayment of principal — Correct answer
Answer: D. The issuer may exercise the option, but the date alone does not assure repayment. The contract expressly gives the issuer a choice and contains no fixed maturity date. Therefore the first call date cannot by itself establish when principal will be repaid. A fund considering the bond must distinguish that contractual uncertainty from any prescribed valuation convention. Remember: Do not substitute a first call date for maturity when the issuer can choose not to call.
Hint, shown before you answer in practice mode: Common mistake: Assuming an instrument will be redeemed on its earliest possible call date.
VA-138mediumapplication
Q21A floating-rate bond in a fund resets its annual coupon to a reference rate plus 1.20 percentage points. At the next reset, the reference rate is 5.25%. Assuming no floor or cap, what annual coupon rate applies after that reset?
Option A. 6.45% — Correct answer
Option B. 5.25%
Why it is wrong: 5.25% omits the contractual spread.
Option C. 4.05%
Why it is wrong: 4.05% subtracts the spread even though the contract says to add it.
Option D. 7.65%
Why it is wrong: 7.65% adds the spread twice.
Answer: A. 6.45% adds the stated spread once to the current reset reference. The reference rate at the reset is 5.25% and the fixed spread is 1.20 percentage points. New annual coupon = 5.25% + 1.20% = 6.45%. This describes the bond coupon, not the fund’s NAV return or the bond’s market yield. Remember: Use the reference rate applicable at reset and add the spread once.
Hint, shown before you answer in practice mode: Common mistake: Confusing the reset coupon with a promised return on the mutual fund holding it.
VA-139easynumerical
Q22A fund of funds quotes an annual expense ratio of 0.40%, expressly excluding expenses borne in its underlying funds. Those underlying funds deduct their own expenses in arriving at their NAVs. Which approach is appropriate when assessing the investor’s overall expense burden?
Option A. Treat 0.40% as the complete burden because only the FoF units are owned
Why it is wrong: The quote excludes a cost layer that affects the value of the FoF’s holdings.
Option B. Consider the FoF expense and the embedded underlying-fund expenses — Correct answer
Option C. Ignore 0.40% because expenses already occur within the underlying funds
Why it is wrong: Underlying expenses do not cancel the FoF’s own separately specified expense.
Option D. Add a separately invoiced amount for every underlying expense to the investor
Why it is wrong: Embedded expenses affect NAV. The scenario does not say that they are separately invoiced to the investor.
Answer: B. This recognises the expressly described two layers without asserting a particular total or legal cap. The quoted 0.40% explicitly excludes the underlying-fund expenses. It cannot therefore be treated as a complete cost measure. The underlying expenses reduce the NAVs of funds owned by the FoF, while the FoF has its own stated expense. Assess both levels using their actual bases and disclosures. Do not assume that the investor receives a separate bill or simply subtract both again from an already net reported return. Remember: Check whether a quoted cost includes or excludes underlying-fund expenses.
Hint, shown before you answer in practice mode: Common mistake: Treating the outer fund’s disclosed ratio as the entire burden or double-deducting costs from a net return.
VA-140mediumapplication
Mutual Fund Products: common questions
How many practice questions are there on Mutual Fund Products?
22 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 8 practice topics for NISM Series V-A, which has 150 questions in total.
Are these real NISM Series V-A questions on Mutual Fund Products?
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 V-A?
No. NISM applies no negative marking to Series V-A. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. 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.
Investor Services
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