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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

A newly set-up mutual fund scheme's units are bought by Mr. Nair directly from the fund house at NAV, and later he sells them back to the fund. In which market category do transactions of this kind primarily fall when viewed by the nature of the instrument and the entity that issues it?

Mutual fund units are securities issued by a collective investment vehicle, so buying them at NAV from the fund and redeeming them back falls within the securities market. They are not government securities, foreign exchange or commodity spot instruments.

  1. ACollective investment vehicle units issued by the fund in the securities marketCorrect
  2. BGovernment securities market only
  3. CForeign exchange market
  4. DCommodity spot market

Explanation

Mutual fund units are securities issued by a collective investment vehicle, and purchases or redemptions at NAV occur with the fund itself. They are not G-secs, forex or commodity transactions. Hence the units fall under securities issued by collective investment schemes.

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