NISM V-D Mutual Fund Scheme Performance — Practice Questions
Practise how scheme performance is benchmarked and disclosed — choosing a benchmark, total return indices, peer comparison, and the rules on presenting past performance.
30 questions on Scheme Performance in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Choosing a benchmark
- Total return indices
- Peer comparison
- Rules on presenting performance
Free sample questions
1. Identify the FALSE statement/s with respect to BENCHMARKS of mutual fund schemes. A) The right benchmark for a Sector Fund will be an index representing the respective sector B) All Equity Funds schemes will have similar benchmarks
- A. Only A is false
- B. Only B is false ✅
- C. Both A and B are false
- D. Neither A nor B are false
Answer: B — Only B is false
Why: Different type of equity funds will have different benchmarks. For eg. Some equity funds investing in large companies; while there are others that focus on mid-cap stocks or small cap stocks. S&P BSE Sensex and Nifty 50 indices are appropriate benchmarks for those equity funds that invest in large companies. For mid-cap funds, mid-cap indices such as Nifty Midcap 50 or S&P BSE Midcap are considered as better benchmarks. A sector fund would invest in only the concerned sector. Sectoral / thematic funds select sectora / thematic indices such as S&P BSE Bankex, S&P BSE FMCG Index, Nifty Infrastructure Index, Nifty Energy Index etc.
💡 Different equity fund types need different benchmarks (large/mid/sector) -> NOT all the same.
2. For a benchmark to be credible and relevant for a mutual fund scheme, it should match which of the following ?
- A. The overall size of the scheme
- B. The scheme’s expense ratio
- C. The scheme’s investment objective ✅
- D. All of the above
Answer: C — The scheme’s investment objective
Why: A benchmark is used to compare the performance of a mutual fund scheme. Therefore, it should match the scheme’s investment objective and portfolio style. For example, a large-cap equity fund should be compared with a large-cap market index (Like Nifty50 or BSE Sensex). Similarly, a Gilt Fund should be compared against a Government Securities Index. Expense ratio or scheme size does not decide the benchmark.
💡 Credible benchmark must match the scheme's investment objective (not size or expense ratio).
3. Identify the FALSE statement/s with respect to benchmarks for mutual fund schemes. A. A Multi-Cap fund can have Nifty 500 index as its benchmark B. A Multi-Cap fund can have BSE Sensex as its benchmark
- A. Only A is false
- B. Only B is false ✅
- C. Both A and B are false
- D. None of the above
Answer: B — Only B is false
Why: A Multi-Cap fund invests in Large Cap, Mid Cap and Small Cap stocks as per proportions stipuated by SEBI. The Nifty500 index represents top 100 large cap companies, top 150 Mid-cap companies and top 250 small cap companies. Therefore, it can be a good benchmark for a Multi-Cap fund. The BSE Sensex has 30 large cap stocks from various sectors and it can be good benchmark for a large cap fund and not for a multi cap fund.
💡 Multi-Cap benchmark = Nifty 500 (broad); BSE Sensex (30 large-caps) is NOT suitable.
Practise all 30 Scheme Performance questions
Plus the full 853-question NISM V-D bank and real-feel mock exams.
Other NISM V-D topics
Investment LandscapeConcept & Role of Mutual FundsLegal StructureLegal & RegulatoryScheme Related InformationDistribution & ChannelsNAV, TER & PricingTaxationInvestor ServicesRisk, Return & PerformanceScheme SelectionBasics of DerivativesUnderstanding the IndexForwards & FuturesOptionsEquity Derivative StrategiesInterest Rates & Fixed IncomeInterest Rate DerivativesInterest Rate FuturesInterest Rate OptionsInterest Rate Strategies