Portfolio Manager
10 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 Stocks20
- Investing in Fixed Income Securities25
- Understanding Derivatives25
- Mutual Funds25
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 10 questions on Portfolio Manager, with answers
Q1A client authorises a portfolio manager to choose securities and execute trades within an agreed investment mandate, without obtaining approval for each individual trade. Which service description best fits this arrangement?
Option A. Non-discretionary portfolio management
Why it is wrong: Here the client retains the individual investment decisions. That differs from the delegated authority described.
Option B. Discretionary portfolio management — Correct answer
Option C. Advice-only service with client execution
Why it is wrong: Advice alone does not give the adviser the trade-selection and implementation authority described in the question.
Option D. Execution-only brokerage on client instructions
Why it is wrong: An execution-only broker follows the client’s orders rather than selecting investments under a discretionary mandate.
Answer: B. The manager makes and implements individual investment decisions within the authority agreed with the client. Identify the two powers in the agreement: choosing securities and executing the resulting transactions. Both are delegated here. Because the client need not approve each trade, the arrangement is discretionary rather than client-directed at the individual-trade level. Delegation does not mean unrestricted trading. The stated investment mandate still limits what the manager is authorised to do, and the label says nothing about assured returns. Remember: Classify the service by decision-making authority, not by whether a professional is involved.
Hint, shown before you answer in practice mode: Common mistake: Confusing delegated decisions with unlimited freedom to ignore the client’s mandate.
X-A-151easyconceptual
Q2A manager proposes portfolio changes, but the client decides whether each proposed investment will be made. The manager then implements only the client-approved decisions under a portfolio-management agreement. Which description is most appropriate?
Option A. Non-discretionary portfolio management — Correct answer
Option B. Discretionary portfolio management
Why it is wrong: This would delegate investment decisions. Requiring the client to make each decision is the distinguishing contrary fact.
Option C. Advice only, with implementation entirely outside the service
Why it is wrong: The facts expressly include implementation by the manager, so an advice-only description omits an important part.
Option D. A pooled fund in which a fund manager chooses all holdings
Why it is wrong: The facts describe management under an individual client’s decisions, not units in a commonly managed pooled portfolio.
Answer: A. The client retains the investment decisions while the manager administers and implements those approved decisions. Separate proposing an investment from deciding to undertake it. The professional proposes, but the client makes the investment decision. Next identify who implements the approved decision: the manager. This distinguishes the described arrangement from the advice-only alternative. The decisive issue is not whether the manager can send an order. It is whether the manager can independently choose the investment without the required client decision. Remember: Decision authority and transaction implementation are related but separate dimensions of a service.
Hint, shown before you answer in practice mode: Common mistake: Calling every service that implements a trade discretionary.
X-A-152easyconceptual
Q3An agreement covers investment recommendations only. It gives the professional no authority to select trades on the client’s behalf or execute them. Which activity remains outside this advice-only agreement?
Option A. Placing trades for the client without separate implementation authority — Correct answer
Option B. Discussing the risks of the recommended investments
Why it is wrong: Risk discussion helps the client assess a recommendation and does not require execution authority.
Option C. Revisiting a recommendation after the client’s circumstances change
Why it is wrong: Reviewing advice can remain within an advisory engagement without granting authority to place trades.
Option D. Explaining how a recommended allocation relates to the stated goal
Why it is wrong: Explaining the proposed allocation is part of giving intelligible investment recommendations.
Answer: A. Recommendations do not themselves confer authority to execute transactions for the client. Read the express scope: the professional may recommend investments but has no trade-selection or execution authority for the client. Explaining risks, linking recommendations to goals and reviewing advice are compatible with that stated advisory role. Placing a trade would cross the agreement’s stated boundary unless separate authority were established. This question tests the scenario’s scope, not a universal legal rule for every advisory business. Remember: Check the actual authority granted before assuming that advice includes transaction execution.
Hint, shown before you answer in practice mode: Common mistake: Treating acceptance of a recommendation as automatically creating an execution mandate.
X-A-153easyconceptual
Q4A discretionary portfolio agreement expressly prohibits borrowing and restricts investments to listed ordinary shares. The manager sees an attractive unlisted investment that would require borrowed funds. Which action respects the existing mandate?
Option A. Execute because discretion overrides the written restrictions
Why it is wrong: Delegated investment discretion operates within the mandate rather than replacing its restrictions.
Option B. Do not execute the proposed transaction under the existing authority — Correct answer
Option C. Borrow only briefly so that the borrowing restriction does not apply
Why it is wrong: The scenario contains no exception for short borrowing periods. Inventing one changes the agreement.
Option D. Execute and rely on the next portfolio report to obtain retrospective acceptance
Why it is wrong: Reporting after a trade does not make the trade consistent with the authority stated before execution.
Answer: B. The transaction conflicts with both express restrictions, regardless of the manager’s investment outlook. The proposal violates two independent conditions: the investment is unlisted and the financing involves borrowing. Neither an optimistic forecast nor a short proposed holding or borrowing period removes either restriction in the facts given. Under the existing agreement, the transaction should not be undertaken. Any possible future change in authority is a separate matter requiring an appropriate process, not a justification for trading first. Remember: Investment opportunity and permission to invest are different questions.
Hint, shown before you answer in practice mode: Common mistake: Using expected profitability as a substitute for mandate compliance.
X-A-154mediumconceptual
Q5Arrangement P manages securities recorded for each client separately. Arrangement Q pools contributions in a fund and gives investors units representing an interest in that pool. Which distinction is supported by these stated structures?
Option A. Q gives each investor unilateral authority to select that investor’s slice of the fund’s holdings
Why it is wrong: Units represent an interest in the described pool. The facts give no individual security-selection authority.
Option B. P must be passive while Q must be active
Why it is wrong: Ownership structure does not determine whether the investment strategy is active or passive.
Option C. P is individual portfolio management. Q is a pooled investment structure — Correct answer
Option D. P and Q both require every investor to own exactly the same underlying securities directly
Why it is wrong: Separate portfolios need not be identical, and owning fund units is different from direct ownership of every fund asset.
Answer: C. The distinction follows from separate client portfolios in P versus ownership through units of one pool in Q. In P, portfolio records and securities are associated with individual clients. That is the defining structure supplied in the question. In Q, the investor holds units in the pool. The pool’s underlying investments are not described as separately selected accounts for every unitholder. Neither arrangement determines performance, risk or active-versus-passive style by itself. Those depend on the mandate and investments, which must be assessed separately. Remember: Identify what the investor actually holds before comparing managed investment products.
Hint, shown before you answer in practice mode: Common mistake: Inferring management style or guaranteed performance from the ownership structure alone.
X-A-155mediumconceptual
Q6A hypothetical annual fee is 1% of the opening portfolio value of ₹80,00,000. The portfolio is worth ₹88,00,000 immediately before the fee is deducted at year-end. There is no performance fee. What is the management fee?
Option A. ₹8,000
Why it is wrong: This applies 1% only to the ₹8,00,000 investment gain, which is not the stated fee base.
Option B. ₹80,000 — Correct answer
Option C. ₹88,000
Why it is wrong: This uses closing value even though the agreement specifies opening value as the fee base.
Option D. ₹8,00,000
Why it is wrong: This is the portfolio’s gross increase, not the management fee charged at 1% of opening value.
Answer: B. The stated 1% is applied to the ₹80,00,000 opening-value base, not to the closing valuation. The agreement explicitly selects opening portfolio value. Therefore use ₹80,00,000 and disregard closing value for this fee calculation. Fee = ₹80,00,000 × 0.01 = ₹80,000. Deducting it from ₹88,00,000 would leave ₹87,20,000 before any other unspecified costs. The increase to ₹88,00,000 does not change the chosen opening-value base. These are hypothetical terms, not a prescribed fee rate or a statement about a real provider. Remember: Read the fee percentage, base and deduction timing together.
Hint, shown before you answer in practice mode: Common mistake: Automatically applying every annual fee percentage to the year-end valuation.
X-A-156easynumerical
Q7A hypothetical portfolio starts at ₹1 crore and finishes a year at ₹1.16 crore before fees. The agreement charges 20% only on the gain above an 8% annual hurdle on opening value, with no catch-up and no other fee. What performance fee is due?
Option A. ₹1,60,000 — Correct answer
Option B. ₹3,20,000
Why it is wrong: This charges 20% on the entire ₹16,00,000 gain, disregarding the no-catch-up hard hurdle.
Option C. ₹23,20,000
Why it is wrong: This applies the fee percentage to all closing assets, including the original invested capital.
Option D. ₹8,00,000
Why it is wrong: This is the hurdle gain and also the excess gain here. Neither amount is itself the 20% fee.
Answer: A. Only ₹8,00,000 of gain exceeds the ₹8,00,000 hurdle gain, and 20% of that excess is ₹1,60,000. Gross investment gain = ₹1.16 crore − ₹1 crore = ₹16,00,000. The hurdle gain is 8% × ₹1 crore = ₹8,00,000. Eligible excess gain = ₹16,00,000 − ₹8,00,000 = ₹8,00,000. Apply the 20% sharing rate to this excess, giving ₹1,60,000. The investor’s post-fee value would be ₹1,14,40,000. A hurdle is a fee threshold in this contract. It does not promise that the investment will earn 8%. Remember: Separate gross gain, hurdle gain, chargeable gain and the fee itself.
Hint, shown before you answer in practice mode: Common mistake: Treating a hurdle as either a promised investment return or a fee on all profits.
X-A-157mediumnumerical
Q8A hypothetical fee arrangement has ₹30 lakh of profit available after returning all invested capital. Allocate the first ₹8 lakh to the investor, the next ₹2 lakh entirely to the manager as catch-up, and split the remaining profit 80% to the investor and 20% to the manager. What total profit share does the manager receive?
Option A. ₹4 lakh
Why it is wrong: This includes the 20% share of the final pool but omits the separately allocated catch-up.
Option B. ₹4.40 lakh
Why it is wrong: This applies 20% to all profit above ₹8 lakh and ignores the explicit 100%-to-manager catch-up stage.
Option C. ₹6 lakh — Correct answer
Option D. ₹8 lakh
Why it is wrong: This adds ₹2 lakh of catch-up to 20% of all ₹30 lakh, double-counting amounts already allocated.
Answer: C. The manager receives ₹2 lakh of catch-up plus 20% of the ₹20 lakh remaining profit. The ₹30 lakh consists only of profit: invested capital has already been returned and must not be deducted again. After ₹8 lakh goes to the investor and ₹2 lakh to the manager, ₹20 lakh remains. The manager’s final-stage share is 20% × ₹20 lakh = ₹4 lakh. Manager total = ₹2 lakh + ₹4 lakh = ₹6 lakh. Investor total = ₹8 lakh + 80% × ₹20 lakh = ₹24 lakh. The two shares reconcile to all ₹30 lakh. Remember: Apply waterfall stages in sequence and reconcile the final allocations to the available pool.
Hint, shown before you answer in practice mode: Common mistake: Applying the last-stage percentage to profit that has already been allocated.
X-A-158hardnumerical
Q9A hypothetical account has an established performance-fee high-water mark of ₹1.25 crore. It fell to ₹1 crore and later recovered to ₹1.20 crore. Its agreement charges a performance fee only on value above the unchanged high-water mark. There are no client cash flows, fixed fees or hurdle adjustments. What performance fee is due on this recovery?
Option A. A fee on the full ₹20 lakh recovery
Why it is wrong: This treats the recovery from a drawdown as new fee-eligible gains without applying the high-water mark.
Option B. A fee on ₹1.20 crore
Why it is wrong: The agreement charges only above the high-water mark, not on the account’s entire current value.
Option C. Zero — Correct answer
Option D. A fee on ₹5 lakh
Why it is wrong: ₹5 lakh is the remaining shortfall below the threshold, not a gain above it.
Answer: C. The recovered account value remains below the ₹1.25 crore threshold, so there is no chargeable excess. Compare the current ₹1.20 crore with the unchanged ₹1.25 crore threshold. The account is ₹5 lakh below the threshold. Chargeable excess = maximum of zero and ₹1.20 crore − ₹1.25 crore = zero. A fee percentage is unnecessary because its base is zero. Although the account gained ₹20 lakh from its low point, that is not the same as exceeding its high-water mark. The question excludes new cash flows that could require additional contractual adjustments. Remember: A recovery from a loss is not automatically a new performance-fee profit.
Hint, shown before you answer in practice mode: Common mistake: Resetting the fee threshold to the account’s lowest recent value.
X-A-159mediumconceptual
Q10An account opens at ₹1 crore and closes at ₹1.15 crore before fees. First deduct a fixed fee equal to 1% of opening value. Then charge 20% of any remaining value above ₹1.08 crore, without catch-up. There are no other charges or cash flows. What is the final account value after both fees?
Option A. ₹1,12,80,000 — Correct answer
Option B. ₹1,13,60,000
Why it is wrong: This subtracts a ₹1.40 lakh performance fee from gross assets but omits the fixed fee and its ordering.
Option C. ₹1,12,60,000
Why it is wrong: This calculates the performance fee on the ₹7 lakh pre-fixed-fee excess rather than the ₹6 lakh remaining excess.
Option D. ₹1,14,00,000
Why it is wrong: This deducts only the fixed fee and ignores the positive performance-fee base.
Answer: A. Deduct ₹1 lakh first, then 20% of the ₹6 lakh excess over ₹1.08 crore, leaving ₹1.128 crore. Fixed fee = 1% × ₹1 crore = ₹1 lakh. Account value after the fixed fee is ₹1.15 crore − ₹1 lakh = ₹1.14 crore. The remaining excess over the stated ₹1.08 crore threshold is ₹6 lakh. Performance fee = 20% × ₹6 lakh = ₹1.20 lakh. Final value = ₹1.14 crore − ₹1.20 lakh = ₹1,12,80,000. Total fees of ₹2.20 lakh reconcile gross closing value to net closing value. Remember: Follow the specified sequence rather than adding headline fee percentages.
Hint, shown before you answer in practice mode: Common mistake: Calculating the performance fee before a fixed fee when the agreement says the reverse.
X-A-160hardnumerical
Portfolio Manager: common questions
How many practice questions are there on Portfolio Manager?
10 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 Portfolio Manager?
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.
Overview of Alternative Investment Funds (AIFs)
15 questions on Overview of Alternative Investment Funds (AIFs). Its quiz opens on that unit.
Open Overview of Alternative Investment Funds (AIFs)