Introduction to the Indian Financial Markets
4 questions. Each answer is explained.
Question 1 of 4Practice · Series X-A — Investment Adviser (Level 1)
0 right · 0 wrong · 4 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
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
- Securities Market Segments21
- Introduction to Investment5
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 4 questions on Introduction to the Indian Financial Markets, with answers
Q1An investor wants to open a demat account and access a depository’s services. Which role provides that investor-facing access? Consider the roles stated, even when one organisation offers several services.
Option A. A stock broker acting only in its trade-execution role
Why it is wrong: A stock broker in its trade-execution role facilitates buying and selling. That role alone is not the depository interface.
Option B. A bank acting only in its savings-account role
Why it is wrong: A bank operating a savings account holds money. A bank may separately act as a DP, but its savings-account function is not the requested service.
Option C. A depository participant — Correct answer
Option D. A fund manager acting only in its portfolio-selection role
Why it is wrong: A fund manager selects and manages a portfolio. That does not make portfolio management the demat-account access service.
Answer: C. The DP is the investor-facing intermediary through which depository services and the demat account are accessed. The investor is seeking an account and services through which securities can be held electronically. That points to a DP. A trading broker’s execution function, a bank’s money account and a fund manager’s security-selection function are different from this depository-access role. An organisation can perform more than one role, but the question asks the capacity in which it provides access to the depository. Remember: Distinguish institutional roles even when one financial group offers several services.
Hint, shown before you answer in practice mode: Common mistake: Equating an organisation’s name with its role: a bank or broker may separately offer DP services.
X-A-026easyconceptual
Q2Which pairing correctly distinguishes the account used for securities trading through a broker from the account used to hold securities electronically?
Option A. Trading account — trading. Demat account — electronic holdings — Correct answer
Option B. Demat account — trading. Bank account — electronic holdings
Why it is wrong: This swaps securities trading and holding functions: a bank account holds cash, not the electronic securities position.
Option C. Bank account — trading. Trading account — electronic holdings
Why it is wrong: A bank account is the money account. A trading account is not the depository holding account.
Option D. Demat account — trading. Trading account — electronic holdings
Why it is wrong: This reverses the trading and demat roles.
Answer: A. This assigns trading to the trading account and securities holdings to the demat account. A trading account provides the broker relationship used to place securities orders. A demat account records electronic securities holdings. The linked bank account handles money. For example, a purchase order goes through the trading account, payment comes from the bank account, and the resulting electronic holding is recorded in the demat account. No settlement deadline is assumed here. Remember: Trade through the broker, pay through the bank, hold securities in demat form.
Hint, shown before you answer in practice mode: Common mistake: Treating all three accounts as interchangeable because they may appear together in one investing interface.
X-A-027easyconceptual
Q3Which institution handles clearing and settlement of trades executed on stock-exchange platforms?
Option A. A credit rating agency
Why it is wrong: A credit rating agency assesses credit risk. That assessment is not the determination and settlement of each trade’s obligations.
Option B. An issue underwriter
Why it is wrong: An issue underwriter has a subscription-related role in a securities issue, not the exchange-trade clearing function.
Option C. A registrar to an issue
Why it is wrong: A registrar administers issue or securities-holder records. This is not the clearing corporation’s trade-settlement role.
Option D. A clearing corporation — Correct answer
Answer: D. The clearing corporation is the institution responsible for the stated clearing and settlement function. The question concerns the post-trade clearing and settlement function, not advice, an issue application or price discovery. The clearing corporation handles that function for trades on the exchange platform. Other institutions perform supporting or distinct roles. Their involvement does not make them the institution asked for here. Remember: Order execution creates a trade. Clearing and settlement deal with the resulting obligations.
Hint, shown before you answer in practice mode: Common mistake: Repeating the word settlement without distinguishing the post-trade process from order execution.
X-A-028easyconceptual
Q4An investor reads a credit rating assigned to a corporate debt security. Which conclusion is justified by the nature of that rating?
Option A. The rating guarantees that the security will not default.
Why it is wrong: An opinion on credit risk does not make default impossible.
Option B. The rating expresses an opinion on credit risk, rather than a recommendation to buy, sell or hold. — Correct answer
Option C. The rating guarantees that the security can always be sold at its face value.
Why it is wrong: A credit rating does not promise a willing buyer at face value when the holder wants to sell.
Option D. The rating establishes that interest-rate changes cannot affect the security’s market price.
Why it is wrong: Even a highly rated bond can experience market-price changes when interest rates change.
Answer: B. This correctly identifies the rating as a credit-risk opinion rather than an investment recommendation. Identify the risk the rating addresses: the issuer or instrument’s ability to meet the rated debt obligations. Credit risk differs from liquidity risk, which concerns selling an investment readily, and interest-rate risk, which concerns the effect of rate changes on value. A rating does not by itself decide whether a security suits a particular investor or should be bought, held or sold. Remember: Read a rating for the risk it assesses, not as a blanket approval of the investment.
Hint, shown before you answer in practice mode: Common mistake: Confusing lower assessed credit risk with an absence of market-price or liquidity risk.
X-A-029mediumconceptual
Introduction to the Indian Financial Markets: common questions
How many practice questions are there on Introduction to the Indian Financial Markets?
4 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 the Indian Financial Markets?
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.
Securities Market Segments
21 questions on Securities Market Segments. Its quiz opens on that unit.
Open Securities Market Segments