NISM V-D Mutual Fund Scheme Selection — Practice Questions

Q: Arjun, 42, runs a mid-sized business and already holds Rs 40 lakh across diversified equity mutual funds. A distributor who has cleared NISM Series V-D suggests he consider an AMC's new Equity Long-Short strategy launched as a Specialized Investment Fund (SIF). Arjun says he can put in Rs 6 lakh now and another Rs 5 lakh into a second strategy from the same AMC in three months. He asks what the fund can actually do that his existing schemes cannot, and whether the amounts he has in mind are workable. Under the Equity Long-Short strategy, what is the maximum short exposure through unhedged derivative positions?

25% of NAV. An Equity Long-Short Fund must keep at least 80% in equity and equity-related instruments, and may take short exposure through unhedged derivative positions of at most 25% of NAV. That limited ability to go short is precisely what an ordinary equity scheme, which may use derivatives only for hedging and rebalancing, cannot do.

The other heavy Module 1 chapter: matching a scheme to an investor's goals, horizon and risk appetite, choosing between equity, debt and hybrid categories, and when a Specialized Investment Fund is — and is not — suitable.

54 questions on Scheme Selection in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.

What this topic covers

Goals, horizon and risk appetite
Choosing between categories
Selecting within a category
When a SIF is suitable

Free sample questions

1. Arjun, 42, runs a mid-sized business and already holds Rs 40 lakh across diversified equity mutual funds. A distributor who has cleared NISM Series V-D suggests he consider an AMC's new Equity Long-Short strategy launched as a Specialized Investment Fund (SIF). Arjun says he can put in Rs 6 lakh now and another Rs 5 lakh into a second strategy from the same AMC in three months. He asks what the fund can actually do that his existing schemes cannot, and whether the amounts he has in mind are workable. What is the minimum investment an investor must have in Specialized Investment Fund strategies of one AMC?

A. Rs 1 lakh per strategy
B. Rs 5 lakh per strategy
C. Rs 10 lakh in aggregate across all strategies of the same AMC, at the PAN level ✅
D. Rs 50 lakh, as for a portfolio management service

Answer: C — Rs 10 lakh in aggregate across all strategies of the same AMC, at the PAN level

Why: SEBI set the minimum investment threshold for SIFs at Rs 10 lakh, measured as the investor's aggregate investment across all investment strategies of the same AMC at the PAN level. The product sits between mutual funds and PMS in flexibility, and the threshold is what keeps small retail investors out of the riskier strategies.

💡 SIF minimum = Rs 10 LAKH aggregate per AMC, at PAN level.

2. Arjun, 42, runs a mid-sized business and already holds Rs 40 lakh across diversified equity mutual funds. A distributor who has cleared NISM Series V-D suggests he consider an AMC's new Equity Long-Short strategy launched as a Specialized Investment Fund (SIF). Arjun says he can put in Rs 6 lakh now and another Rs 5 lakh into a second strategy from the same AMC in three months. He asks what the fund can actually do that his existing schemes cannot, and whether the amounts he has in mind are workable. Arjun proposes Rs 6 lakh now and Rs 5 lakh into a second strategy of the same AMC later. Which statement is correct?

A. He may invest Rs 6 lakh now because the threshold applies only to the total he eventually reaches
B. He cannot invest Rs 6 lakh now; his aggregate across the AMC's strategies must meet the Rs 10 lakh minimum ✅
C. Each strategy needs Rs 10 lakh, so he needs Rs 20 lakh in total
D. The threshold does not apply because he already holds Rs 40 lakh in the AMC's mutual fund schemes

Answer: B — He cannot invest Rs 6 lakh now; his aggregate across the AMC's strategies must meet the Rs 10 lakh minimum

Why: The Rs 10 lakh minimum is an aggregate across an investor's SIF strategies with one AMC, and the AMC must ensure compliance with it. Rs 6 lakh alone is below the threshold, and holdings in ordinary mutual fund schemes do not count towards it. Since it is aggregate rather than per strategy, Rs 20 lakh is not required either.

💡 Aggregate SIF holding must be >= 10 lakh at all times; MF scheme holdings DON'T count.

3. Arjun, 42, runs a mid-sized business and already holds Rs 40 lakh across diversified equity mutual funds. A distributor who has cleared NISM Series V-D suggests he consider an AMC's new Equity Long-Short strategy launched as a Specialized Investment Fund (SIF). Arjun says he can put in Rs 6 lakh now and another Rs 5 lakh into a second strategy from the same AMC in three months. He asks what the fund can actually do that his existing schemes cannot, and whether the amounts he has in mind are workable. Under the Equity Long-Short strategy, what is the maximum short exposure through unhedged derivative positions?

A. 10% of NAV
B. 25% of NAV ✅
C. 50% of NAV
D. There is no limit

Answer: B — 25% of NAV

Why: An Equity Long-Short Fund must keep at least 80% in equity and equity-related instruments, and may take short exposure through unhedged derivative positions of at most 25% of NAV. That limited ability to go short is precisely what an ordinary equity scheme, which may use derivatives only for hedging and rebalancing, cannot do.

💡 Equity Long-Short: min 80% equity, max 25% UNHEDGED short via derivatives.

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NISM V-D Mutual Fund Scheme Selection — Practice Questions

What this topic covers

Free sample questions

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