NISM Series V-A flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Primary market

Market where new securities are issued by companies or governments to raise fresh capital, including IPOs, FPOs, rights issues and private placements.

Secondary market

Marketplace where already-issued securities are bought and sold between investors through stock exchanges at market-determined prices, providing liquidity to holders.

SEBI

Securities and Exchange Board of India, the statutory regulator of the Indian securities market, established in 1988 and given statutory powers by the SEBI Act, 1992.

Net Asset Value

Value of one unit of a scheme, computed as total assets minus total liabilities divided by the number of units outstanding on the valuation date.

Mutual fund pooling

A collective investment vehicle that mobilises money from many investors and invests it in securities as per a stated objective, issuing units in return.

Direct plan

A plan of the same mutual fund scheme carrying a lower expense ratio because no distributor commission is paid, while the portfolio remains identical.

Sponsor

The promoter of a mutual fund who establishes the trust, contributes at least 40% of the asset management company's net worth and needs a five-year track record.

Board of trustees

Body that holds the mutual fund's assets in trust for unit holders, supervises the AMC, and must have at least two-thirds of its members independent.

Asset Management Company

SEBI-registered company incorporated under the Companies Act, 2013 that manages the mutual fund's schemes under the trustees' supervision, with minimum net worth of Rs. 50 crore.

ELSS

Equity Linked Savings Scheme, an equity scheme with minimum 65% equity exposure and a statutory three-year lock-in, offering deduction under Section 80C.

Liquid scheme

Open-ended debt scheme investing in money market instruments with residual maturity up to 91 days, carrying the lowest interest-rate and credit risk among debt categories.

Multi cap scheme

Equity scheme required to hold at least 25% each in large cap, mid cap and small cap stocks, giving exposure across market capitalisations.

Riskometer

Six-level risk indicator (low, low to moderate, moderate, moderately high, high, very high) that must appear on scheme documents, advertisements and application forms.

ARN

AMFI Registration Number, the mandatory identifier a mutual fund distributor must hold, obtained after NISM certification and kept valid through renewal and compliance.

Trail commission

Distributor remuneration paid by the AMC as a percentage of the investor's assets held, accruing over the holding period rather than at the time of purchase.

Entry load

A charge paid by the investor when purchasing mutual fund units; prohibited in Indian mutual funds for new investors since 1 August 2009.

Investor risk profile

Assessment of an investor's risk appetite, time horizon, income, net worth, liquidity needs and tax status, used to match the investor to suitable scheme categories.

Suitability

Principle that a distributor should recommend only schemes consistent with the investor's risk profile, objective and horizon, and should document that rationale.

Risk-adjusted return

Return evaluated relative to the risk taken to earn it, measured through ratios such as Sharpe, Treynor, Sortino and information ratio rather than return alone.

Beta

Measure of a scheme's sensitivity to market movements; a beta of 1 means it moves with the market, while a beta above 1 indicates greater volatility.

Sharpe ratio

Excess return over the risk-free rate per unit of total risk, calculated as portfolio return minus risk-free return, divided by the standard deviation.

Modified duration

Percentage change in a bond's price for a one percent change in yield, indicating how sensitive a debt scheme is to interest rate movements.

CAGR

Compound Annual Growth Rate, equal to ending value divided by beginning value, raised to the power of one over the number of years, minus one.

XIRR

Annualised internal rate of return for irregular cash flows, used to measure systematic investment plan returns where investment dates and amounts vary.

Tracking error

Standard deviation of the difference between portfolio returns and benchmark returns; low values show that an index fund is replicating its index closely.

Rolling return

Return measured over many overlapping periods with different start dates, used to judge how consistently a scheme has performed across market cycles.

Cut-off time

Deadline for accepting a transaction for same-day NAV: 3:00 p.m. generally and 1:30 p.m. for liquid and overnight schemes.

Consolidated Account Statement

Single statement consolidating all mutual fund folios of an investor across AMCs, generated through the depositories and registrars and transfer agents.

Nomination facility

Option allowing a unit holder to designate a person who will receive the redemption proceeds or units on the holder's death; available for every folio.

Amortisation valuation

Method of valuing debt securities with residual maturity up to 60 days by accreting the discount or premium daily towards maturity, ignoring market price movements.

Securities Transaction Tax

Tax on transactions in equity-oriented mutual fund units, levied at 0.001% on both purchase and sale of such units in India.

Distributable surplus

Accumulated realised gains, income and reserves available for distribution to unit holders as dividends; unrealised appreciation is excluded from this amount.