A passive equity fund tracking the S&P BSE Sensex will typically

Question

Accepted Answer

A. {'text': 'Hold only the stocks in the Sensex in the same weights', 'label': 'A'}

1. A passive scheme replicates a specified index in composition and weights.
2. It buys only the constituents of the index, in the same proportion as the index.
3. The fund manager has no discretion over stock selection.
4. Lack of active decision keeps the running cost of passive funds low.
_Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.2.2_

Answer

{'text': 'Hold any stock the fund manager finds attractive', 'label': 'B'}

Answer

{'text': 'Hold a discretionary mix of Sensex and non-Sensex stocks', 'label': 'C'}

Answer

{'text': 'Hold only cash between rebalancing dates', 'label': 'D'}