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An Index Fund or Exchange Traded Fund tracking a specified index must invest at least
A{'text': '65 percent in the index constituents', 'label': 'A'}
B{'text': '80 percent in the index constituents', 'label': 'B'}
C{'text': '95 percent in the index constituents', 'label': 'C'}
D{'text': '100 percent in the index constituents', 'label': 'D'}
Answer & Solution
Correct answer: C. {'text': '95 percent in the index constituents', 'label': 'C'}
1. Index Funds and ETFs are SEBI Other Schemes tracking a specified index.
2. Minimum investment in the specified index constituents must be 95 percent of total assets.
3. The residual 5 percent lets the fund manage cash, receivables and rebalancing.
4. This threshold ensures the tracked scheme faithfully replicates the index.
_Source: NISM Series V-A: Mutual Fund Distributors Workbook (Dec 2019), Ch 2 "Concept and Role of a Mutual Fund", §2.2.4E(1)_
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