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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Scheme Related Information

Which of the following is a feature of an index fund as per SEBI's categorisation?

An index fund passively replicates a chosen index such as the Nifty 50 or Sensex, investing at least 95% of its total assets in the securities of that index. It does not aim to outperform the index, and its returns are not guaranteed because of tracking error.

  1. AIt replicates a specified index such as the Nifty 50 or Sensex, with minimum 95% of total assets in securities of that indexCorrect
  2. BIt actively selects stocks to outperform the benchmark index
  3. CIt invests only in unlisted companies
  4. DIt guarantees returns equal to the index

Explanation

An index fund or ETF passively replicates a given index and must invest at least 95% of total assets in the index securities. Active stock picking describes actively managed funds. Returns are never guaranteed, and tracking error may cause deviation from index returns.

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