Mutual Fund Scheme Performance
5 questions. Each answer is explained.
Question 1 of 5Practice · Series V-D — Mutual Fund - Specialized Investment Fund Distributors
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Learn these topics
More units in NISM Series V-D
- The Investment Landscape5
- Concept & Role of a Mutual Fund4
- Legal Structure of Mutual Funds in India3
- Legal and Regulatory Framework7
- Scheme Related Information7
- Fund Distribution and Channel Management Practices4
- Net Asset Value, Total Expense Ratio and Pricing of Units5
- Taxation3
- Investor Services10
- Risk, Return and Performance of Funds5
- Mutual Fund Scheme Selection10
- Basics of Derivatives10
- Understanding Index5
- Introduction to Forwards and Futures15
- Introduction to Options13
- Strategies Using Equity Futures and Equity Options9
- Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets6
- Interest Rate Derivatives2
- Exchange Traded Interest Rate Futures10
- Exchange Traded Interest Rate Options6
- Strategies Using Interest Rate Derivatives6
Exam format
| Questions | 150 · 1 mark each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 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 | 5 of 150 marks (3.3%) |
Source: July 2026 Annexure I, Chapter 11: Mutual Fund Scheme Performance
NISM Series V-D Mutual Fund - Specialized Investment Fund Distributors
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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 5 questions on Mutual Fund Scheme Performance, with answers
Q1Why is a total-return index generally a more complete benchmark than a price-return index when evaluating an equity fund’s total investment return?
Option A. It measures only fund expenses and ignores price changes of the index constituents
Why it is wrong: An index return is not a measure of the scheme’s expense ratio.
Option B. It guarantees that the fund will outperform the index over every holding period
Why it is wrong: Benchmark construction does not guarantee relative performance.
Option C. It excludes every company whose share price falls during the measurement period
Why it is wrong: A total-return methodology does not mean that losing securities are automatically removed.
Option D. It includes the effect of dividends as well as price changes under the index methodology — Correct answer
Answer: D. A total-return index incorporates dividends according to its methodology, commonly through assumed reinvestment. Comparing a fund’s total return only with price changes can leave out part of the benchmark investor’s return. Remember: Compare returns measured on a consistent economic basis.
Hint, shown before you answer in practice mode: Consider the cash return earned by an equity holder in addition to price appreciation.
V-D-054easyconceptual
Q2Over the same annual period, a fund earns 12%, the risk-free rate is 4%, and the fund’s annual standard deviation is 16%. What is its Sharpe ratio? Assumptions: Returns and standard deviation are all on the same annual basis.
Option A. 2.00
Why it is wrong: This reverses the numerator and denominator.
Option B. 0.25
Why it is wrong: This uses the risk-free rate instead of excess return in the numerator.
Option C. 0.50 — Correct answer
Option D. 0.75
Why it is wrong: This divides total return by volatility without subtracting the risk-free rate.
Answer: C. Sharpe ratio = (12% − 4%)/16% = 0.50. All inputs must use compatible measurement periods and units. Remember: Sharpe ratio relates excess return to total volatility.
Hint, shown before you answer in practice mode: Divide return in excess of the risk-free rate by total volatility.
V-D-055mediumnumerical
Q3A fund earns 12% over a year when the risk-free rate is 4%, and its beta to the selected benchmark is 0.80. Using Treynor ratio as excess return divided by beta, what is the ratio expressed in percentage points per unit of beta? Assumptions: Beta is defined relative to the stated benchmark and all return inputs use the same year.
Option A. 6.4 percentage points per unit of beta
Why it is wrong: This multiplies the excess return by beta instead of dividing.
Option B. 15 percentage points per unit of beta
Why it is wrong: This uses total return rather than excess return.
Option C. 0.8 percentage points per unit of beta
Why it is wrong: This repeats the beta rather than calculating the ratio.
Option D. 10 percentage points per unit of beta — Correct answer
Answer: D. Treynor ratio = (12% − 4%)/0.80 = 10 percentage points per unit of beta. Unlike Sharpe ratio, the denominator here measures benchmark-related risk rather than total volatility. Remember: Different risk-adjusted measures use different definitions of risk.
Hint, shown before you answer in practice mode: The annual excess return is eight percentage points.
V-D-056mediumnumerical
Q4A fund earns 13%. For the same period the risk-free return is 5%, the market benchmark earns 10%, and the fund’s beta is 1.20. Define alpha as actual return minus [risk-free return + beta × (market return − risk-free return)]. What is alpha? Assumptions: The supplied single-period model is used. Inputs are measured over the same period.
Option A. +3 percentage points
Why it is wrong: This subtracts the raw market return without adjusting for beta.
Option B. +8 percentage points
Why it is wrong: This subtracts only the risk-free rate.
Option C. +2 percentage points — Correct answer
Option D. −4 percentage points
Why it is wrong: This incorrectly applies beta to total market return rather than the market risk premium.
Answer: C. The model benchmark is 5% + 1.20 × (10% − 5%) = 11%. Alpha is 13% − 11% = +2 percentage points under this model and these inputs. Remember: Alpha depends on the specified risk model and benchmark.
Hint, shown before you answer in practice mode: Calculate the beta-adjusted required return before comparing it with 13%.
V-D-057hardnumerical
Q5An index fund’s return minus its benchmark return over four equal periods is −1, +1, −1 and +1 percentage points. Use population standard deviation of these differences as tracking error. Which pair is correct? Assumptions: Population standard deviation is used. No annualisation of the four-period measure is requested.
Option A. Mean tracking difference = −1, tracking error = 2 percentage points
Why it is wrong: This takes an extreme observation and the range instead of the mean and standard deviation.
Option B. Mean tracking difference = 0, tracking error = 0
Why it is wrong: Zero average difference does not mean zero variability.
Option C. Mean tracking difference = 1, tracking error = 0
Why it is wrong: The differences average zero and vary around that average.
Option D. Mean tracking difference = 0, tracking error = 1 percentage point — Correct answer
Answer: D. The four differences sum to zero, so their mean is zero. Each squared deviation from zero is one, making population tracking error sqrt(1) = 1 percentage point. Remember: A fund can have no average tracking difference and still have non-zero tracking error.
Hint, shown before you answer in practice mode: Calculate the average difference, then the variability around that average.
V-D-058hardnumerical
Mutual Fund Scheme Performance: common questions
How many practice questions are there on Mutual Fund Scheme Performance?
5 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 22 practice topics for NISM Series V-D, which has 150 questions in total.
Are these real NISM Series V-D questions on Mutual Fund Scheme Performance?
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.
How much of the NISM Series V-D exam is Mutual Fund Scheme Performance?
NISM's published syllabus outline gives it 5 of the paper's 150 marks, or 3.3% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: July 2026 Annexure I, Chapter 11: Mutual Fund Scheme Performance
Does negative marking apply to NISM Series V-D?
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.
Mutual Fund Scheme Selection
10 questions on Mutual Fund Scheme Selection. Its quiz opens on that unit.
Open Mutual Fund Scheme SelectionPaper Trading Try it on the practice trading desk