Test Objectives (w.e.f April 4, 2022) – NISM-Series-V-C Mutual Fund Distributors (Level 2)
Unit 1: Investment Theory and Building Blocks
1.1. Understand Asset allocation and diversification
1.1.1. Discuss the nature of different asset categories
1.1.2. Understand historical perspective on Returns and Risk in Equity, Debt and Gold
1.1.3. Discuss Understand CAPM
1.1.4. Discuss Markowitz portfolio diversification
1.1.4.1. Security level
1.1.4.2. Asset class level
1.1.4.3. International diversification
1.2. Know Equity Investment Management Strategies
1.2.1. Fundamental Analysis
1.2.2. Technical Analysis
1.2.3. Quantitative Analysis
1.2.4. Smart Beta Strategies
1.2.5. Leveraged Beta
1.2.6. Fundamental Indexing / Quality Indexing
1.3. Know Debt Investment Management Strategies
1.3.1. Differentiate between money market instruments and debt funds
1.3.2. Understand yield curve
1.3.3. Discuss the Inverse relation between interest rate and bond prices
1.3.4. Understand Duration management
1.3.4.1. Know about modified duration and Macaulay’s duration
1.3.4.2. Know maturity spread, dynamic duration management, Running down the yield curve
1.3.5. Understand Credit risk management
1.3.5.1. Understand credit spread
1.3.5.2. Understand credit rating
1.3.5.3. Know credit rating nomenclature
1.3.6. Understand Liquidity Management
1.4. Derivatives for Mutual Funds
1.4.1. Introduction to basic derivative products and markets
1.4.2. Understand various applications of derivatives
1.4.2.1. Hedging (covers: long put option, selling futures)
1.4.2.2. Arbitrage
1.4.2.3. Alpha hedging
1.4.2.4. Paired arbitrage
1.4.2.5. Covered call writing
1.4.2.6. Securities lending
1.4.2.7. Interest rate futures
1.4.2.8. Credit risk derivatives (CDS, CDO)
1.4.2.9. Portfolio rebalancing and replicating an index
1.4.3. Understand Risks involved in derivatives
1.5. Discuss Multi asset portfolios
1.5.1. Discuss in detail various asset allocation strategies
1.5.2. Understand Risks in asset allocation strategies
Unit 2: Investment strategies and fund categories
(Discuss the various categories in the context of SEBI circular on categorization of mutual fund schemes)
2.1. Equity Funds
2.1.1 Growth style
2.1.2 Value style
2.1.3 Dividend yield
2.1.4 Contrarian
2.1.5 Momentum
2.1.6 Focused
2.1.7 Sectoral / Thematic
2.1.8 Close-ended funds
2.2 Debt Funds
2.2.1 Accrual and duration funds (refer to SEBI categorization)
2.2.2 FMPs
2.3 Hybrid Funds
2.3.1 Asset allocation funds
• Aggressive
• Moderate
• Conservative
• Multi asset
• Balanced advantage fund / Dynamic asset allocation fund
2.3.2 Arbitrage
2.3.3 Equity savings
2.3.4 Capital guaranteed and Capital protection oriented
2.4 Solution Oriented Funds
2.4.1 Retirement Funds
2.4.2 Children Funds
2.5 Index Funds and ETFs
2.5.1 Index Funds
2.5.2 Exchange Traded Funds
2.6 Fund of funds / Feeder funds
2.7 International funds
2.8 Infrastructure debt funds (NBFC IDF & MF IDF)
2.9 REMF
2.10 Comparison among fund categories
Unit 3: Competitive Landscape
3.1 PMS
3.2 Alternate Investment Funds
3.2.1 Venture Capital Funds
3.2.2 Angel Funds
3.2.3 Private Equity Funds
3.2.4 Hedge Funds
3.3 REIT & INVITs
3.4 Index linked debenture
3.5 NPS
3.6 ULIP/ULPP
Unit 4: (A) Valuation of Securities for Mutual Fund Schemes
4.1 Understand and analyse how investments are valued in schemes
4.1.1 Valuation of Equities
4.1.2 Valuation of Debt
Role of CRA as Valuation Service Providers
4.1.3 Valuation of Gold
4.1.4 Valuation of Real Estate
4.1.5 Valuation of Derivatives
4.1.6 NPA Provisioning in case of debt instruments
4.1.7 Segregated portfolio in case of debt funds
Unit 4: (B) Accounting
4.2 Unit capital accounting
4.3 Investment accounting
4.4 Income accounting
4.5 Expense accounting
4.6 Dividend accounting
4.7 NAV computation
Unit 5: Taxation
5.1 Analyse the impact of various tax provisions on mutual funds and investors in mutual fund schemes
5.1.1 Dividend Distribution Tax
5.1.2 Taxability of dividends and capital gains
• LTCG & STCG
• Indexation
• Setting off gains and losses and carry forward of losses under Income Tax Act
5.1.3 Securities Transactions Tax
Unit 6: Investor Services
6.1 Transaction Life Cycle
6.2 Briefly outline the concepts of nomination and pledge, transmission, change of status (RI- to-NRI, NRI-to-RI, minor-to-major, change of Karta of HUF, changes in PoA, change of Guardian)
6.3 Discuss adoption of technology (online transactions, etc.) for enhancing customer experience
6.4 Awareness against Cyber Security attacks – Do’s & Don’t
Unit 7: Scheme Evaluation
7.1 Understand risks in fund Investing: Standard Deviation and Beta (Systematic & unsystematic risks in detail)
7.2 Understand Benchmarks and their role in scheme evaluation
7.3 Analyse the fund managers’ performance using Sharpe Ratio, Sortino Ratio, Treynor Ratio, Jensen’s Alpha, Appraisal Ratio, Information Ratio, Eugene Fama and M2
7.4 Understand the advantages and limitations of the quantitative and qualitative methods of evaluation of mutual fund schemes
7.5 Reading the scheme documents and the factsheets for the purpose of scheme evaluation
Unit 8: Legal and Regulatory Environment of Mutual Funds
8.1 Understand the investment norms for mutual funds
8.2 Discuss the regulations pertaining to borrowings by mutual funds
8.3 Know the regulatory framework for REMF and Infrastructure Debt Funds
8.4 Discuss mutual fund’s fundamental attributes and the implications of changes to these fundamental attributes
Unit 9: Ethics and Investor Protection
9.1 Discuss prevention of mis-selling of mutual funds
9.2 Know the safeguards provided by the structure of mutual funds
9.3 Discuss the SEBI Measures for investor protection
9.4 Discuss the Investor grievance redressal mechanism
Unit 10: Case Studies
10.1 Evaluation/Comparison of mutual fund schemes
10.2 Interpretation of risk measures from extract of factsheet data
10.3 Indexation calculation based case
10.4 Comparison of schemes on risk adjusted returns
10.5 Comparison of debt funds on the basis of portfolio composition
10.6 SIP in ELSS and lock-in provisions
10.7 Dividend Reinvestment in ELSS and lock-in provisions
10.8 Mutual funds and wealth creation
10.9 MFs for an investor seeking regular income (dividend option vs SWP)
