Investing in Stocks
20 questions. Each answer is explained.
Question 1 of 10Practice · 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
- Introduction to Investment5
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 20 questions on Investing in Stocks, with answers
Q1An investor replaces a holding in one company with holdings in many companies across different sectors, with no single company dominating. Which statement about the effect on risk is most appropriate?
Option A. Company-specific concentration can be reduced, while market-wide risk remains — Correct answer
Option B. Market-wide risk is removed, while exposure to any individual company is unchanged
Why it is wrong: This reverses the distinction: adding companies does not remove common market exposure while leaving concentration risk unchanged.
Option C. Company-specific risk cannot be reduced by diversification within equities
Why it is wrong: Different companies can reduce dependence on one company’s outcome even when all holdings are equities. Cross-asset investment is not required for that particular benefit.
Option D. Market-wide risk is eliminated once all major sectors are represented
Why it is wrong: Broad shocks can affect multiple sectors together. Sector breadth does not eliminate their shared market exposure.
Answer: A. This correctly distinguishes reduced company-specific concentration from remaining market-wide risk. A problem isolated to one company—such as a failure at that company’s plant—has less influence when no one holding dominates. A broad economic shock can affect many companies in different sectors at the same time, so owning several names does not remove that common exposure. Diversification therefore addresses concentration in company-specific outcomes, not every possible source of loss. Remember: Diversification can reduce the impact of individual-company events while common market risk remains.
Hint, shown before you answer in practice mode: Common mistake: Treating a diversified portfolio as risk-free or assuming each underlying company becomes safer simply because it is one holding among many.
X-A-056mediumconceptual
Q2A portfolio contains shares in 15 different airlines and no other investments. A sustained increase in aviation-fuel costs adversely affects all 15 businesses. Which shared exposure has the portfolio most clearly retained?
Option A. Credit risk from a borrower’s missed debt payment
Why it is wrong: No missed debt payment is specified. The stated exposure is an operating input cost shared by airlines.
Option B. Broad market risk shared across unrelated sectors
Why it is wrong: The facts single out airlines and their common fuel-cost exposure. They do not establish the broad shock to unrelated sectors needed for this alternative.
Option C. Company-specific risk isolated to a single airline
Why it is wrong: An isolated company-specific event would not explain the same stated input-cost effect across all 15 airlines.
Option D. Sector-specific risk from concentration in airlines — Correct answer
Answer: D. Sector-specific risk remains because every holding is concentrated in the airline industry. Every holding is an airline, so the stated fuel-cost increase affects an important shared operating input. Because all 15 businesses are adversely affected through that industry exposure, the example is not an event isolated to one company. The question describes an airline-sector shock rather than establishing an equally broad shock to every sector of the economy. Remember: Count independent sources of economic exposure, not just the number of stocks.
Hint, shown before you answer in practice mode: Common mistake: Assuming that diversification within one industry automatically removes industry-level risk.
X-A-057mediumconceptual
Q3An investor needs to sell a large shareholding. Few buyers are available near the last traded price, and selling the entire position immediately would require accepting substantially lower prices. Which risk is most directly illustrated?
Option A. Credit risk caused by a missed contractual debt payment
Why it is wrong: Credit risk concerns non-performance of debt obligations. No missed payment is given.
Option B. Currency risk caused by an exchange-rate movement
Why it is wrong: Currency risk concerns exchange-rate exposure. No currency change is given.
Option C. Liquidity risk — Correct answer
Option D. Business risk caused by a decline in the issuer’s operating earnings
Why it is wrong: Business risk can change investment value, but the stated obstacle is execution size and available buyers, not company operating results.
Answer: C. The shortage of buyers for the required size near the quoted price is liquidity risk. The investor needs to sell a large position but available buyers near the last traded price are limited. Accepting much lower prices to complete an immediate sale is the liquidity difficulty described. The scenario does not specify missed debt payments, foreign-exchange changes or deterioration of the company’s operating results as the cause. Remember: Check depth and executable size, not only the latest quotation, when considering liquidity.
Hint, shown before you answer in practice mode: Common mistake: Assuming that the price of a small last trade is available for the whole holding.
X-A-058easyconceptual
Q4An unhedged investment costs 100 units of a foreign currency when the exchange rate is ₹80 per foreign-currency unit. It is later sold for 110 units when the rate is ₹76 per unit. There are no distributions or other cash flows. What is the holding-period return measured in rupees?
Option A. 4.5% — Correct answer
Option B. 10.0%
Why it is wrong: 10% is the asset return measured only in foreign currency.
Option C. 15.0%
Why it is wrong: 15% adds the 10% asset gain to the magnitude of the 5% currency change, using the wrong sign and combination.
Option D. 5.0%
Why it is wrong: 5% comes from the shortcut 10% − 5%. It omits the interaction of the two changes.
Answer: A. 4.5% includes both the foreign-asset gain and the adverse currency conversion. Initial rupee cost = 100 foreign-currency units × ₹80 = ₹8,000. Final rupee proceeds = 110 units × ₹76 = ₹8,360. Rupee return = (₹8,360 − ₹8,000) ÷ ₹8,000 × 100 = 4.5%. An equivalent check is 1.10 × (76 ÷ 80) − 1 = 1.10 × 0.95 − 1 = 0.045. The +10% asset return and −5% currency movement combine multiplicatively. Remember: Convert both the initial and final amounts to the same currency before measuring the return.
Hint, shown before you answer in practice mode: Common mistake: Adding asset and currency percentage returns instead of multiplying their growth factors.
X-A-059mediumnumerical
Q5An investor buys one share for ₹250 and later sells it for ₹265. During the holding period the investor receives a cash dividend of ₹10, which is not reinvested. Ignoring the time value of that interim payment, what is the total holding-period return?
Option A. 6%
Why it is wrong: 6% includes only the price gain.
Option B. 4%
Why it is wrong: 4% includes only the dividend.
Option C. 14%
Why it is wrong: 14% includes the dividend component twice: 6% + 4% + 4%.
Option D. 10% — Correct answer
Answer: D. 10% includes each source of return once. Price gain = ₹265 − ₹250 = ₹15, or ₹15 ÷ ₹250 = 6% of the original cost. Dividend contribution = ₹10 ÷ ₹250 = 4%. The question assumes no reinvestment and ignores the time value of this interim cash. Total return = (₹15 + ₹10) ÷ ₹250 × 100 = 10%, also equal to 6% + 4%. Remember: Measure total gain relative to the original investment and include all stated distributions.
Hint, shown before you answer in practice mode: Common mistake: Treating price appreciation as the complete return or annualising when the holding period has not been specified.
X-A-060mediumnumerical
Q6An analyst first studies the overall economy, then identifies industries likely to benefit from those conditions, and finally examines individual companies in the selected industries. Which research approach does this describe?
Option A. Technical analysis based primarily on price and volume patterns
Why it is wrong: Price-and-volume chart analysis uses a different primary input from the stated economy–industry–company sequence.
Option B. Top-down fundamental analysis — Correct answer
Option C. Bottom-up fundamental analysis starting with company-level opportunities
Why it is wrong: Bottom-up company analysis reverses the starting point by beginning with individual businesses.
Option D. Passive replication of a specified market index
Why it is wrong: Index replication follows a benchmark’s prescribed holdings or exposures, not the stated fundamental selection sequence.
Answer: B. Top-down fundamental analysis matches the broad-to-narrow sequence. The sequence in the question starts with the overall economy. It then selects industries and finally assesses companies within them. That economy → industry → company sequence is top-down. A company-first sequence or a chart-pattern study would be a different analytical route. Neither is described here. Remember: Identify the direction of analysis, not just whether the analyst discusses companies somewhere in the process.
Hint, shown before you answer in practice mode: Common mistake: Calling any company research bottom-up even when the companies were selected after an economy and industry screen.
X-A-061easyconceptual
Q7Analyst P studies historical share-price patterns and trading volumes. Analyst Q estimates future business cash flows after examining demand, costs and management decisions. Which pairing best describes their primary approaches?
Option A. P: fundamental analysis. Q: technical analysis
Why it is wrong: This reverses P’s market-data approach and Q’s business-cash-flow approach.
Option B. P: technical analysis. Q: technical analysis
Why it is wrong: P is correctly classified, but Q’s analysis is fundamental rather than technical.
Option C. P: technical analysis. Q: fundamental analysis — Correct answer
Option D. P: fundamental analysis. Q: fundamental analysis
Why it is wrong: Q is correctly classified, but P’s chart and volume work is technical rather than fundamental.
Answer: C. P is technical and Q is fundamental, matching the described inputs. P studies historical price patterns and trading volumes, which identifies the technical approach. Q studies demand, costs and management decisions to estimate cash flows, which identifies fundamental analysis. For example, a price trend is a market-data input, whereas a sales or cost forecast is a business-value input. Neither approach assures a correct forecast. Remember: Distinguish the information being analysed before assigning an analytical label.
Hint, shown before you answer in practice mode: Common mistake: Assuming that all analysis of a share is fundamental analysis merely because the subject is a company.
X-A-062easyconceptual
Q8An investor expects a dividend of ₹11 per share at the end of year one and ₹12.10 at the end of year two. Immediately after receiving the second dividend, the investor expects to sell the share for ₹121. This sale price excludes the dividend just received. With a 10% annual discount rate and no other cash flows, what is the present value of the expected receipts?
Option A. ₹110
Why it is wrong: ₹110 can result from omitting one of the two dividends: each has a present value of ₹10 here.
Option B. ₹131
Why it is wrong: ₹131 equals ₹10 + ₹121: it discounts the first dividend, omits the second dividend and leaves the sale proceeds undiscounted.
Option C. ₹144.10
Why it is wrong: ₹144.10 simply adds ₹11 + ₹12.10 + ₹121 without allowing for either waiting period.
Option D. ₹120 — Correct answer
Answer: D. ₹120 discounts all stated receipts to today and includes each once. At year 1, receive ₹11. Its present value is ₹11 ÷ 1.10 = ₹10. At year 2, receive ₹12.10 dividend plus ₹121 sale proceeds = ₹133.10. Present value = ₹133.10 ÷ 1.10^2 = ₹110. Total present value = ₹10 + ₹110 = ₹120. These are expected inputs, not assured future receipts. Remember: Put receipts on a timeline, then discount amounts occurring at each date.
Hint, shown before you answer in practice mode: Common mistake: Omitting the final dividend because a sale occurs at the same time, despite the sale price being explicitly ex-dividend.
X-A-063mediumnumerical
Q9Share A trades at ₹80 with trailing EPS of ₹4. Share B trades at ₹400 with trailing EPS of ₹20. Which conclusion about their trailing P/E is justified?
Option A. Share A has a lower P/E because its share price is lower
Why it is wrong: Share A’s lower nominal price is matched by lower earnings per share, leaving the same P/E.
Option B. Both shares have the same trailing P/E of 20 — Correct answer
Option C. Share B has a trailing P/E five times that of Share A
Why it is wrong: Share B’s price is five times Share A’s, but its earnings per share are also five times higher.
Option D. Both shares must have identical future returns
Why it is wrong: An equal valuation multiple does not guarantee equal future performance.
Answer: B. Both P/E ratios are 20, so nominal share price alone does not make A cheaper on the stated measure. A’s trailing P/E = ₹80 ÷ ₹4 = 20. B’s trailing P/E = ₹400 ÷ ₹20 = 20. Each is priced at 20 times the stated trailing earnings per share. The equal ratios establish only equality on this measure. They do not establish identical growth, risk, accounting quality or future returns. Remember: Compare like ratios and their underlying economics, not nominal share prices in isolation.
Hint, shown before you answer in practice mode: Common mistake: Calling a lower-priced share cheap without examining how much earning power each share represents.
X-A-064mediumconceptual
Q10A share trades at ₹360. Earnings per share for the latest completed year are ₹15, while estimated earnings per share for the next year are ₹18. What are the trailing and forward P/E ratios respectively, using the current price for both?
Option A. 24 and 20 — Correct answer
Option B. 20 and 24
Why it is wrong: This reverses the past and forecast denominators.
Option C. 24 and 24
Why it is wrong: This uses ₹15 historical EPS for both ratios and ignores the forecast.
Option D. 20 and 20
Why it is wrong: This uses ₹18 forecast EPS for both ratios and ignores historical earnings.
Answer: A. 24 trailing and 20 forward use the correct earnings period for each ratio. Trailing P/E = current price ₹360 ÷ historical EPS ₹15 = 24. Forward P/E = current price ₹360 ÷ forecast EPS ₹18 = 20. With an unchanged numerator, a higher positive earnings denominator produces a lower multiple. The forecast may not be realised. Remember: Always specify which earnings period a P/E ratio uses.
Hint, shown before you answer in practice mode: Common mistake: Treating a lower forward P/E as evidence that earnings have already grown rather than that growth is forecast.
X-A-065mediumnumerical
Q11Company A has a share price of ₹100 and a loss per share of ₹5, so price divided by signed earnings per share is −20. Company B has positive earnings and a P/E of 15. Which conclusion is justified from these facts alone?
Option A. A is cheaper solely because −20 is numerically below B’s P/E of 15
Why it is wrong: A numerical ordering of −20 and +15 does not demonstrate that a loss-making business is better value.
Option B. Taking the absolute value makes A’s loss-based ratio directly equivalent to a positive-earnings P/E of 20
Why it is wrong: Taking the absolute value hides the fact that A has a loss rather than positive earnings.
Option C. A’s negative denominator reflects a loss. The two numbers alone do not establish that A is cheaper — Correct answer
Option D. A’s negative ratio establishes that earnings will become positive in the next year
Why it is wrong: A negative trailing earnings ratio does not provide a forecast of when earnings will become positive.
Answer: C. This correctly recognises the negative denominator and the limit of the comparison. For A, ₹100 ÷ (−₹5) = −20 because the denominator is a loss. For B, the stated P/E of 15 is based on positive earnings. Simply ranking −20 below +15 mixes economically different earnings situations. The facts do not establish A’s future profits, a recovery date or investment merit. The signed arithmetic result is acknowledged without treating it as a valuation verdict. Remember: Understand the denominator before comparing valuation multiples.
Hint, shown before you answer in practice mode: Common mistake: Treating a negative P/E as more attractive merely because it is numerically lower than a positive multiple.
X-A-066mediumconceptual
Q12A share has a P/E of 24 and expected earnings growth of 12% a year. What is its PEG ratio?
Option A. 0.5
Why it is wrong: 0.5 reverses numerator and denominator: 12 ÷ 24.
Option B. 2.0 — Correct answer
Option C. 200
Why it is wrong: 200 uses 0.12 rather than the instructed whole-number input of 12.
Option D. 288
Why it is wrong: 288 multiplies 24 by 12 rather than dividing.
Answer: B. 2.0 follows the stated convention: 24 ÷ 12. Use P/E = 24 and enter the 12% growth assumption as 12, as instructed. PEG = 24 ÷ 12 = 2.0. The calculation compares the price/earnings multiple with the specified growth input. A result of 2.0 is not a guaranteed return or a stand-alone fair-value conclusion. It depends on the earnings and growth assumptions used. Remember: Write down the unit convention before calculating a ratio that mixes a multiple and a percentage input.
Hint, shown before you answer in practice mode: Common mistake: Entering 12% as 0.12 despite the specified PEG convention, or treating a PEG threshold as a universal valuation rule.
X-A-067easynumerical
Q13A share trades at ₹400 with trailing EPS of ₹20. No dividend figure is given. Which statement follows?
Option A. The investor is guaranteed an annual cash payment of ₹20
Why it is wrong: ₹20 of EPS does not promise that ₹20 will be paid in cash to the shareholder.
Option B. The share has a P/E ratio of 5
Why it is wrong: P/E is 20. 5 is the earnings yield expressed as a percentage, not the P/E multiple.
Option C. The dividend yield is necessarily 5%
Why it is wrong: A 5% dividend yield would require a ₹20 dividend per share, which has not been stated.
Option D. The trailing earnings yield is 5% — Correct answer
Answer: D. 5% is the earnings yield, while the dividend remains unspecified. Trailing earnings yield = ₹20 ÷ ₹400 × 100 = 5%. The reciprocal price/earnings multiple is ₹400 ÷ ₹20 = 20, not 5. No dividend amount is supplied. A company may retain some or all earnings rather than distribute the entire EPS, so cash dividend yield cannot be inferred here. Remember: Distinguish accounting earnings, cash distributions and market-price-based ratios.
Hint, shown before you answer in practice mode: Common mistake: Equating earnings yield with the investor’s actual cash income yield.
X-A-068mediumconceptual
Q14A share's last five closing prices, oldest first, are ₹100, ₹104, ₹102, ₹110 and ₹109. What is its three-day simple moving average at the end of day five?
Option A. ₹105
Why it is wrong: ₹105 is the average of all five supplied closes, not the latest three-day window.
Option B. ₹102
Why it is wrong: ₹102 is the average of the first three closes, not the most recent three.
Option C. ₹107 — Correct answer
Option D. ₹105.33
Why it is wrong: About ₹105.33 averages days two to four (₹104, ₹102 and ₹110), stopping one day too early.
Answer: C. ₹107 is the arithmetic mean of the latest three closing prices. Select the last three closes: ₹102, ₹110 and ₹109. Add them: ₹102 + ₹110 + ₹109 = ₹321. Divide by 3 to obtain ₹107. The older ₹100 and ₹104 observations drop outside the three-day window. An average summarises these prices. It does not guarantee the next price. Remember: Select the correct observations before doing the averaging.
Hint, shown before you answer in practice mode: Common mistake: Using the full five-day list, the first three observations or a forecast instead of the specified rolling window.
X-A-069easynumerical
Q15Which scenario most directly raises a concern about transparency and a potential conflict of interest that warrants further investigation?
Option A. Management refuses to explain a large transaction with an entity controlled by the chief executive’s family — Correct answer
Option B. Management provides the terms and rationale of a transaction with an entity connected to a director
Why it is wrong: Explaining the terms and rationale supplies information for analysis. The stated action is not a refusal to disclose them.
Option C. The board commissions an independent assessment of a proposed transaction with a connected entity
Why it is wrong: Using an independent review supplies additional scrutiny. Its existence alone is not proof of perfection, but it is not the described red flag.
Option D. A director declares a family connection to a counterparty and does not participate in the decision
Why it is wrong: Declaring a connection and not participating in the decision is a conflict-management step, not the concealment described in A.
Answer: A. A significant connected transaction combined with refusal to explain its terms is the stated transparency and conflict concern. The chief executive’s family connection creates a potential conflict to examine. The question does not assume that every connected transaction is unlawful. Refusing to explain a large transaction prevents the analyst from assessing its terms and rationale. That is the specific concern. The other scenarios describe disclosure, scrutiny or conflict-management steps rather than the refusal and opacity specified in A. They do not by themselves guarantee good governance. Remember: Treat a governance red flag as a reason for further investigation, not automatically as a legal finding.
Hint, shown before you answer in practice mode: Common mistake: Concluding that a related-party connection alone proves illegality, or that a governance procedure alone proves an absence of all conflicts.
X-A-070mediumconceptual
Q16CASE: A company's share price is ₹180. It has 2 crore shares and full-year profit after tax of ₹30 crore. What is its trailing P/E?
Option A. 6
Why it is wrong: 6 divides ₹180 by 30, as if profit were ₹30 a share.
Option B. 12 — Correct answer
Option C. 15
Why it is wrong: 15 is EPS in rupees, not the P/E.
Option D. 18
Why it is wrong: 18 does not follow. EPS is ₹15.
Answer: B. EPS = ₹30 crore ÷ 2 crore shares = ₹15. P/E = ₹180 ÷ ₹15 = 12. Remember: Convert total ordinary-shareholder earnings to per-share earnings before using a per-share price.
Hint, shown before you answer in practice mode: Common mistake: Mixing total-profit units with per-share price units or confusing EPS with P/E.
X-A-071mediumapplication
Q17CASE: A company's share price is ₹180. It has 2 crore shares and book equity of ₹120 crore. What is its price-to-book ratio?
Option A. 1.5
Why it is wrong: 1.5 treats ₹120 crore of book equity as ₹120 a share.
Option B. 2.0
Why it is wrong: 2.0 does not follow from book value of ₹60 a share.
Option C. 6.0
Why it is wrong: 6.0 is double the right answer.
Option D. 3.0 — Correct answer
Answer: D. Book value per share = ₹120 crore ÷ 2 crore = ₹60. P/B = ₹180 ÷ ₹60 = 3.0. Remember: Use equity attributable to the same shareholder class in both sides of an equity valuation ratio.
Hint, shown before you answer in practice mode: Common mistake: Confusing accounting book equity with total assets, or combining aggregate rupees with per-share rupees.
X-A-072mediumapplication
Q18CASE: A company's share price is ₹180 and it has 2 crore shares. Full-year revenue is ₹480 crore. What is its price-to-sales ratio?
Option A. 0.75 — Correct answer
Option B. 1.33
Why it is wrong: 1.33 is the ratio turned upside down.
Option C. 3.00
Why it is wrong: 3.00 does not use sales as the base.
Option D. 6.00
Why it is wrong: 6.00 divides by a profit figure, not by sales.
Answer: A. Market capitalisation = ₹180 × 2 crore = ₹360 crore. Price-to-sales = ₹360 crore ÷ ₹480 crore = 0.75. Remember: Name the numerator and denominator before inserting numbers into any valuation ratio.
Hint, shown before you answer in practice mode: Common mistake: Substituting a different familiar multiple merely because its inputs are also provided in the case.
X-A-073mediumapplication
Q19CASE: A company's market capitalisation is ₹360 crore. It has debt of ₹90 crore, cash of ₹30 crore and EBITDA of ₹60 crore. What is its EV/EBITDA multiple?
Option A. 6.0
Why it is wrong: 6.0 uses market value alone and ignores debt and cash.
Option B. 7.5
Why it is wrong: 7.5 adds debt but does not take off cash.
Option C. 7.0 — Correct answer
Option D. 8.0
Why it is wrong: 8.0 adds cash instead of taking it off.
Answer: C. EV = ₹360 crore + ₹90 crore − ₹30 crore = ₹420 crore. EV/EBITDA = ₹420 crore ÷ ₹60 crore = 7.0. Remember: Distinguish equity value from enterprise value and follow the signs of the stated adjustments.
Hint, shown before you answer in practice mode: Common mistake: Using market capitalization as EV or treating the resulting multiple as an investor return.
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Q20CASE: A share trades at ₹180 and paid a cash dividend of ₹4.50 a share last year. What is its historical dividend yield?
Option A. 8.33%
Why it is wrong: 8.33% does not follow from ₹4.50 and ₹180.
Option B. 2.50% — Correct answer
Option C. 4.50%
Why it is wrong: ₹4.50 is a rupee amount, not 4.50%.
Option D. 25.00%
Why it is wrong: 25% puts the decimal point in the wrong place.
Answer: B. Dividend yield = ₹4.50 ÷ ₹180 = 2.5%. Remember: Use the actual dividend numerator and identify the period before labelling a yield.
Hint, shown before you answer in practice mode: Common mistake: Confusing historical cash yield, earnings yield and a guarantee of future distributions.
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Investing in Stocks: common questions
How many practice questions are there on Investing in Stocks?
20 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 Investing in Stocks?
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 Fixed Income Securities
25 questions on Investing in Fixed Income Securities. Its quiz opens on that unit.
Open Investing in Fixed Income Securities