The correct answer is: A. There is no load on the generator.
The magnetic neutral axis is the axis along which the magnetic field lines are evenly distributed. The geometrical neutral axis is the axis along which the stator windings are located. In a DC generator, the magnetic neutral axis coincides with the geometrical neutral axis when there is no load on the generator. This is because the magnetic field is not distorted by the current flowing through the stator windings when there is no load.
When the generator is loaded, the current flowing through the stator windings creates a magnetic field that distorts the magnetic field of the rotor. This causes the magnetic neutral axis to shift away from the geometrical neutral axis. The amount of shift depends on the amount of load on the generator.
The magnetic neutral axis and the geometrical neutral axis coincide again when the generator is unloaded. This is because the current flowing through the stator windings is zero when there is no load.