Introduction to Investment
5 questions. Each answer is explained.
Question 1 of 5Practice · Series X-A — Investment Adviser (Level 1)
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Learn these topics
More units in NISM Series X-A
- Introduction to Personal Financial Planning4
- Time Value of Money14
- Evaluating the Financial Position of Clients5
- Debt Management and Loans2
- Introduction to the Indian Financial Markets4
- Securities Market Segments21
- Investing in Stocks20
- Investing in Fixed Income Securities25
- Understanding Derivatives25
- Mutual Funds25
- Portfolio Manager10
- Overview of Alternative Investment Funds (AIFs)15
- Introduction to Modern Portfolio Theory14
- Portfolio Construction Process11
- Portfolio Performance Measurement and Evaluation25
- Operational Aspects of Investment Management15
- Key Regulations15
- Ethical Issues15
- Grievance Redress Mechanism15
Exam format
| Questions | 135 · 1 or 2 marks each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 25% · 0.25 or 0.5 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series X-A Investment Adviser (Level 1)
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 5 questions on Introduction to Investment, with answers
Q1An investor buys ordinary equity shares of Company P and plain non-convertible bonds issued by Company Q. Which description correctly identifies the investor’s relationship with the two companies?
Option A. Lender to both companies
Why it is wrong: This incorrectly treats the equity investment in P as a loan.
Option B. Part-owner of Company P and lender to Company Q — Correct answer
Option C. Part-owner of both companies
Why it is wrong: This incorrectly treats the plain non-convertible bond as ordinary-share ownership.
Option D. Lender to Company P and part-owner of Company Q
Why it is wrong: This reverses both relationships.
Answer: B. This correctly assigns ownership to P’s shares and lending to Q’s bonds. Company P’s ordinary shares make the investor a shareholder, or part-owner, of P. Company Q’s plain non-convertible bonds make the investor a lender to Q, not an ordinary shareholder merely by holding that bond. Non-convertible distinguishes the instrument from one that converts into equity under its terms. A debt claim is not a guarantee that all payments will in fact be made. Remember: Identify the nature of the claim—ownership or debt—before considering its return and risks.
Hint, shown before you answer in practice mode: Common mistake: Assuming every security issued by a company confers the same shareholder rights.
X-A-051easyconceptual
Q2Investor P individually selects and buys the shares in a personal portfolio. Investor Q buys units of a mutual fund whose investment team selects the underlying securities within the scheme’s objective. Which statement correctly distinguishes the two approaches?
Option A. Both investors personally select every underlying security held in their portfolios
Why it is wrong: Q does not personally choose every underlying holding in the stated fund arrangement.
Option B. Investor P delegates security selection to the mutual fund’s investment team
Why it is wrong: P selects the shares personally and has not delegated that selection to the mutual fund.
Option C. Investor Q’s choice of a professionally managed fund eliminates investment risk
Why it is wrong: Using a managed fund changes who makes portfolio decisions. It does not eliminate investment risk.
Option D. Investor Q delegates underlying security selection to professional fund managers — Correct answer
Answer: D. Q delegates underlying security selection while retaining the decision about which fund to choose. P chooses the individual shares in the personal portfolio. That is direct underlying-security selection. Q chooses a mutual fund and delegates selection of the fund’s underlying securities to its managers. Q still needs to consider whether the fund’s objective, costs and risks match the intended investment purpose. Professional management does not guarantee a return. Remember: Delegation changes the management process, not the need to choose a suitable investment route.
Hint, shown before you answer in practice mode: Common mistake: Confusing professional management with certainty of returns or the removal of all investor decisions.
X-A-052easyconceptual
Q3An investor compares a bullion-based gold ETF that seeks domestic gold-price exposure with ordinary shares in a gold-mining company. Which distinction is most accurate?
Option A. The ETF’s intended bullion exposure differs from ownership of a mining business with production and operating costs — Correct answer
Option B. Both have the same economic exposure because the mining company’s costs do not affect its shareholders
Why it is wrong: The gold connection does not make the mining company’s costs and output irrelevant.
Option C. The ETF necessarily holds mining-company shares, so both are equity investments in miners
Why it is wrong: A bullion-based ETF is not, by that description, a portfolio of mining-company equities.
Option D. Both represent the same ownership claim on the mining company’s physical gold
Why it is wrong: A mining-company share is an ownership claim in the business, not the same claim as the fund’s bullion exposure.
Answer: A. Bullion-price exposure differs from ownership of a mining business with operating risks. The fund in the question seeks domestic gold-price exposure through bullion. The comparison security is a mining-company share. A gold price movement affects the economic setting, but mining-company results can also change because of extraction costs, production disruptions and company decisions. It is therefore not justified to expect the two investments to deliver identical returns merely because both relate to gold. Remember: Look through a product name to the underlying assets and economic risks.
Hint, shown before you answer in practice mode: Common mistake: Grouping every gold-related investment as though it owns the same asset and has the same return drivers.
X-A-053easyconceptual
Q4A client must pay ₹10,00,000 in four months. The proposed funding source is a vacant plot, but comparable plots have taken more than a year to sell. Even if the estimated plot value exceeds ₹10,00,000, what is the clearest mismatch?
Option A. Inflation risk from future changes in the required payment amount before it is due
Why it is wrong: No increase in the required payment is stated. The facts instead identify a potential delay in converting the plot to cash.
Option B. Currency risk from a foreign-exchange conversion of the plot’s sale proceeds
Why it is wrong: No foreign-currency amount or exchange-rate conversion is given.
Option C. Liquidity risk from uncertainty about receiving sale proceeds by the deadline — Correct answer
Option D. Interest-rate risk from repricing a fixed-income investment before the deadline
Why it is wrong: The proposed source is a plot, and no fixed-income repricing scenario is given. The stated obstacle is the sale timeline.
Answer: C. The expected difficulty in turning the plot into cash by the payment date is the direct mismatch. The payment deadline is four months away. Comparable plot sales have taken more than a year. Even if the plot is estimated to be worth more than the liability, the client may not complete a sale and receive funds by the deadline. This is a timing and liquidity mismatch. The facts do not establish a specific inflation loss, foreign-exchange exposure or interest-rate movement. Remember: For a cash deadline, estimated wealth and available cash are different tests.
Hint, shown before you answer in practice mode: Common mistake: Treating a valuation above the liability as proof that the liability can be paid on time.
X-A-054mediumconceptual
Q5A hypothetical product has a principal amount of ₹2,00,000. Its maturity payment is principal plus 50% of any positive index return multiplied by principal, but this additional payment cannot exceed 10% of principal. There are no other payments. The index rises 30% over the product’s term. Assuming the issuer pays the stated amount in full, what is the total maturity payment?
Option A. ₹2,30,000
Why it is wrong: ₹2,30,000 applies 50% participation but ignores the 10% cap.
Option B. ₹2,20,000 — Correct answer
Option C. ₹2,60,000
Why it is wrong: ₹2,60,000 credits the full 30% index rise and ignores both participation and the cap.
Option D. ₹20,000
Why it is wrong: ₹20,000 is the additional payment only, without principal.
Answer: B. ₹2,20,000 applies participation, then the cap, and includes principal. Uncapped participation return = 50% × 30% = 15% of principal, or ₹30,000. The additional-payment cap is 10% of ₹2,00,000 = ₹20,000. Use the smaller of ₹30,000 and ₹20,000. Total maturity payment = principal ₹2,00,000 + capped additional payment ₹20,000 = ₹2,20,000. The result assumes the issuer pays the contractual amount as stated. Remember: Apply payoff conditions in order: underlying return, participation, cap, then add principal if the terms require it.
Hint, shown before you answer in practice mode: Common mistake: Mixing up the extra return with the total payout or ignoring an issuer-payment assumption.
X-A-055mediumnumerical
Introduction to Investment: common questions
How many practice questions are there on Introduction to Investment?
5 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 20 practice topics for NISM Series X-A, which has 285 questions in total.
Are these real NISM Series X-A questions on Introduction to Investment?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series X-A?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1 or 2-mark question that is 0.25 or 0.5 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Investing in Stocks
20 questions on Investing in Stocks. Its quiz opens on that unit.
Open Investing in Stocks