Securities Market Segments
21 questions. Each answer is explained.
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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
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 21 questions on Securities Market Segments, with answers
Q1In exchange-traded securities transactions, what is the principal purpose of collecting margin?
Option A. To replace the full purchase consideration for every cash-market transaction
Why it is wrong: Full purchase consideration and margin serve different purposes. A margin payment should not automatically be treated as the complete purchase price.
Option B. To pay interest on all securities bought through an exchange
Why it is wrong: Interest is a charge for borrowing. The collateral function described here is not an interest payment.
Option C. To provide collateral against failure to meet payment or delivery obligations — Correct answer
Option D. To impose a fixed maximum change in the security’s market price
Why it is wrong: Collecting collateral does not impose a fixed limit on how far a security’s market price can move.
Answer: C. Collateral against failure to meet payment or delivery obligations is the risk-control purpose of margin. Trades can create obligations whose value and risk change before they are fully discharged. Collateral helps protect against non-performance of payment or delivery obligations. It does not prevent prices from moving or remove the investor’s possibility of loss. The question tests the purpose of margin. It does not specify a margin rate, calculation method or collection deadline. Remember: Margin manages counterparty exposure. It is not a promise that the trade is safe or profitable.
Hint, shown before you answer in practice mode: Common mistake: Treating the amount deposited as margin as either a maximum possible trading loss or the full price of the investment.
X-A-030mediumconceptual
Q2Transaction 1: An investor subscribes for newly issued shares and the company receives the subscription money. Transaction 2: An investor buys existing listed shares from another investor on a stock exchange. How should the transactions be classified?
Option A. Both are primary-market transactions.
Why it is wrong: The second transaction is resale between investors, not fresh issuance.
Option B. Both are secondary-market transactions.
Why it is wrong: The first transaction is the company’s new issuance, not a resale by an investor.
Option C. Transaction 1 is secondary-market. Transaction 2 is primary-market.
Why it is wrong: This reverses both classifications.
Option D. Transaction 1 is primary-market. Transaction 2 is secondary-market. — Correct answer
Answer: D. This correctly assigns primary-market issuance to Transaction 1 and secondary-market resale to Transaction 2. In Transaction 1, the company issues new shares and receives subscription cash. That is primary-market issuance. In Transaction 2, an existing shareholder sells listed shares to another investor. That is secondary-market trading, with cash going to the seller. Classify the specific transactions given. Do not extend the distinction to a claim that every public offer consists exclusively of newly issued shares. Remember: Ask whether new securities are being issued and who receives the payment.
Hint, shown before you answer in practice mode: Common mistake: Assuming that the issuer receives cash whenever its shares change hands on an exchange.
X-A-031easyconceptual
Q3An already listed company makes a fresh issue of equity shares to the public. The offer is not restricted to its existing shareholders. Which description applies?
Option A. Initial public offer
Why it is wrong: An initial public offer is the first public-offer route associated with an unlisted company, not the already listed issuer described.
Option B. Further public offer — Correct answer
Option C. Bonus issue
Why it is wrong: A bonus issue allots additional shares to existing holders without a subscription payment. That is a different action.
Option D. Rights issue
Why it is wrong: A rights issue is based on an offer to existing shareholders, which is not the offer described.
Answer: B. A further public offer matches the issuer’s listed status and the public-offer route. The company is already listed, so its described public offer is not its initial public offer. The fresh shares are offered to the public rather than through an entitlement restricted to existing shareholders, so the described route is not a rights issue. The question describes a fresh public issue, not free additional shares allotted by capitalising reserves. Remember: Identify both the issuer’s status and the audience or entitlement through which shares are offered.
Hint, shown before you answer in practice mode: Common mistake: Calling every new issue an IPO even when the issuing company is already listed.
X-A-032easyconceptual
Q4A public offer contains 12,00,000 newly issued shares and an offer for sale of 8,00,000 existing shares by selling shareholders. Every share is sold at ₹150. Ignoring issue expenses, how much gross cash does the company receive from this offer?
Option A. ₹18 crore — Correct answer
Option B. ₹30 crore
Why it is wrong: ₹30 crore combines company receipts with the selling shareholders’ receipts.
Option C. ₹12 crore
Why it is wrong: ₹12 crore belongs to the selling shareholders, not the issuer.
Option D. ₹1.8 crore
Why it is wrong: ₹1.8 crore is a factor-of-ten conversion error: ₹18,00,00,000 equals 18 crore, not 1.8 crore.
Answer: A. ₹18 crore is the fresh-issue component received by the company. Fresh-issue cash = 12,00,000 new shares × ₹150 = ₹18,00,00,000, or ₹18 crore. Selling-shareholder cash = 8,00,000 existing shares × ₹150 = ₹12,00,00,000, or ₹12 crore. The total offer collects ₹30 crore, but only ₹18 crore is the company’s gross receipt. Expenses are excluded by the question. Remember: Follow the cash recipient for each component instead of treating total offer size as issuer funding.
Hint, shown before you answer in practice mode: Common mistake: Including offer-for-sale receipts in the issuing company’s capital raised.
X-A-033mediumnumerical
Q5An issue’s final price is discovered using investor demand at different price levels within the stated price band. Which pricing process does this describe?
Option A. A fixed-price public issue
Why it is wrong: A fixed-price offer specifies the offer price rather than discovering it from bids in a band.
Option B. Pricing solely at the share’s face value
Why it is wrong: Using face value alone ignores the investor-demand information that the question says is used.
Option C. Book building — Correct answer
Option D. Automatic selection of the price-band midpoint
Why it is wrong: A mechanical midpoint calculation uses only the two band endpoints, not the demand represented by bids.
Answer: C. Book building is the demand-based price-discovery process described. The issue in the question has a price band and receives investor bids at different price levels. The final issue price is discovered from that demand: this is book building. Neither the share’s face value nor the simple midpoint of the band by itself describes the stated demand-based process. Remember: Book building concerns demand-based discovery. A price band is not itself the final offer price.
Hint, shown before you answer in practice mode: Common mistake: Assuming that the price must equal the band midpoint or face value regardless of bids.
X-A-034easyconceptual
Q6An investor applies for an IPO through ASBA, and ₹1,50,000 is blocked in the investor’s bank account. The final allotment requires payment of ₹45,000. With no other debit or block involved, what should happen to the application amount?
Option A. ₹1,50,000 is debited permanently, regardless of the allotment.
Why it is wrong: A partial allotment does not justify permanently debiting the full application amount.
Option B. ₹45,000 is unblocked and ₹1,05,000 is debited.
Why it is wrong: This reverses the required debit and release amounts.
Option C. ₹1,50,000 remains blocked because the allotment was only partial.
Why it is wrong: The amount not needed for allotment is not left blocked merely because the allotment is partial.
Option D. ₹45,000 is debited and the remaining ₹1,05,000 is unblocked. — Correct answer
Answer: D. Debit ₹45,000 for the allotted securities and unblock the unused ₹1,05,000. The application blocks ₹1,50,000. The final allotment needs only ₹45,000. The allotment-related debit is ₹45,000. The unused portion is ₹1,50,000 − ₹45,000 = ₹1,05,000. That unused ₹1,05,000 is unblocked. The question supplies no other debit or block and makes no claim about a particular processing deadline. Remember: Keep three amounts separate: application block, allotment debit and unused funds released.
Hint, shown before you answer in practice mode: Common mistake: Calling the entire blocked application amount a completed payment before the allotment is known.
X-A-035mediumnumerical
Q7Company P completes a fully paid, cash-subscribed rights issue. Company Q completes a bonus issue by capitalising reserves. Which statement correctly identifies the fresh subscription cash received by the issuers?
Option A. Both P and Q receive fresh subscription cash because both allot additional shares
Why it is wrong: Both actions can increase share count, but only the cash-subscribed rights issue brings in the stated subscription cash.
Option B. Only P receives fresh subscription cash. Q’s bonus capitalises reserves — Correct answer
Option C. Only Q receives fresh subscription cash. P’s rights issue capitalises reserves
Why it is wrong: This reverses the two cash-flow effects.
Option D. Neither receives fresh subscription cash because existing shareholders are involved
Why it is wrong: A rights offer that is subscribed and paid for does bring in cash. It is not merely an internal transfer.
Answer: B. This correctly distinguishes cash raised under the rights issue from the reserve capitalisation underlying the bonus issue. Company P’s rights shares are paid for by subscribers, producing fresh cash for P. Company Q’s bonus shares arise through a transfer within equity, from reserves to share capital, rather than a cash contribution from the shareholders. An increase in the number of shares is not sufficient to conclude that new outside cash entered the company. Remember: An increase in share capital need not mean an equal increase in cash received from investors.
Hint, shown before you answer in practice mode: Common mistake: Treating every allotment of additional shares as a fresh cash fund-raising.
X-A-036mediumconceptual
Q8A company has 80,00,000 outstanding equity shares. Each share has a face value of ₹10 and a current market price of ₹125. What is the equity market capitalization?
Option A. ₹100 crore — Correct answer
Option B. ₹8 crore
Why it is wrong: ₹8 crore is 80,00,000 × ₹10, the aggregate face value, not market capitalization.
Option C. ₹10 crore
Why it is wrong: ₹10 crore is one-tenth of the correct market capitalization.
Option D. ₹1,000 crore
Why it is wrong: ₹1,000 crore is ten times the correct market capitalization.
Answer: A. ₹100 crore correctly uses the market price and the share count. Outstanding shares = 80,00,000. Market price per share = ₹125. Market capitalization = 80,00,000 × ₹125 = ₹1,00,00,00,000. One crore is ₹1,00,00,000. Dividing ₹1,00,00,00,000 by that amount gives ₹100 crore. Remember: For market capitalization use outstanding shares × market price, with careful unit conversion.
Hint, shown before you answer in practice mode: Common mistake: Using face value or misplacing a zero when converting a rupee amount into crore.
X-A-037easynumerical
Q9During a period, 20,000 shares trade at ₹240 and another 30,000 shares trade at ₹245. These are the only trades. What is the total traded value?
Option A. ₹1,20,00,000
Why it is wrong: ₹1,20,00,000 prices all 50,000 shares at the first group’s ₹240 and ignores the higher price for 30,000 shares.
Option B. ₹2,43,00,000
Why it is wrong: ₹2,43,00,000 doubles the correct result by counting both sides of each matched trade separately.
Option C. ₹1,21,50,000 — Correct answer
Option D. ₹1,22,50,000
Why it is wrong: ₹1,22,50,000 prices all 50,000 shares at the second group’s ₹245.
Answer: C. ₹1,21,50,000 sums the two correctly priced execution groups. First group: 20,000 × ₹240 = ₹48,00,000. Second group: 30,000 × ₹245 = ₹73,50,000. Total = ₹48,00,000 + ₹73,50,000 = ₹1,21,50,000. Each matched trade is counted once under the question’s convention. Remember: Turnover is a sum of quantity-price products, not necessarily total quantity multiplied by the first or final price.
Hint, shown before you answer in practice mode: Common mistake: Double counting a trade once for the buyer and again for the seller when single counting is explicitly required.
X-A-038mediumnumerical
Q10A two-stock index starts a period with 60% in Stock A and 40% in Stock B. Stock A rises 5% and Stock B falls 4%. What is the index return for the period?
Option A. −1.4%
Why it is wrong: −1.4% reverses the sign of the net positive result.
Option B. +0.5%
Why it is wrong: +0.5% is the equal-weight mean of +5% and −4%, not the return with 60% and 40% weights.
Option C. +3.0%
Why it is wrong: +3.0% includes A’s contribution but omits B’s negative contribution.
Option D. +1.4% — Correct answer
Answer: D. +1.4% correctly includes both weighted contributions. Stock A contributes 60% × 5% = 3.0 percentage points. Stock B contributes 40% × (−4%) = −1.6 percentage points. Adding the contributions gives +1.4%. The calculation follows the expressly defined hypothetical index method. Remember: Keep weights, signs and percentage units consistent when aggregating returns.
Hint, shown before you answer in practice mode: Common mistake: Taking an unweighted average merely because two securities appear in the question.
X-A-039mediumnumerical
Q11A company issues two bonus shares for every five existing shares held. An eligible investor owns 350 shares before the bonus. How many shares will the investor hold after the bonus allotment, assuming no other transaction?
Option A. 140 shares
Why it is wrong: 140 is the new entitlement only, not the final holding.
Option B. 490 shares — Correct answer
Option C. 700 shares
Why it is wrong: 700 doubles the original holding, as though the bonus were one new share per old share.
Option D. 875 shares
Why it is wrong: 875 comes from reversing 2/5 into 5/2 and does not apply the stated entitlement.
Answer: B. 490 correctly adds the bonus entitlement to the original shares. Each block of five old shares earns two new shares. With 350 old shares there are 350 ÷ 5 = 70 blocks. Bonus shares = 70 × 2 = 140. The investor keeps the original 350 shares, so the final holding is 350 + 140 = 490 shares. Remember: Calculate the increment from the ratio, then add it to the existing holding.
Hint, shown before you answer in practice mode: Common mistake: Confusing extra shares with total shares, or assuming that a higher share count alone proves an increase in economic wealth.
X-A-040easynumerical
Q12A company subdivides each fully paid share with a face value of ₹10 into fully paid shares with a face value of ₹2. An investor holds 120 shares before the split. How many shares will the investor hold afterwards?
Option A. 24 shares
Why it is wrong: 24 divides the old share count by five, which reverses the subdivision.
Option B. 120 shares
Why it is wrong: 120 ignores that each old share is replaced by five new shares.
Option C. 240 shares
Why it is wrong: 240 doubles the share count, rather than applying the factor of five.
Option D. 600 shares — Correct answer
Answer: D. 600 applies the correct subdivision factor and preserves aggregate face value. Conversion factor = old face value ÷ new face value = ₹10 ÷ ₹2 = 5 new shares per old share. New holding = 120 × 5 = 600 shares. Check: old aggregate face value = 120 × ₹10 = ₹1,200. New aggregate face value = 600 × ₹2 = ₹1,200. Remember: The lower denomination changes the number of shares, not the aggregate face value under this split.
Hint, shown before you answer in practice mode: Common mistake: Confusing a fall in face value with a reduction in the number of shares held. Actual market-price behaviour is not determined by this arithmetic alone.
X-A-041mediumnumerical
Q13A company declares a cash dividend explicitly equal to 60% of its ₹5 face value per share. An eligible investor holds 800 fully paid shares, currently trading at ₹150 each. What is the gross dividend payable to this investor?
Option A. ₹2,400 — Correct answer
Option B. ₹72,000
Why it is wrong: ₹72,000 incorrectly calculates 60% of the ₹150 market price for each of 800 shares.
Option C. ₹4,000
Why it is wrong: ₹4,000 is 800 × ₹5, the aggregate face value rather than 60% of that value.
Option D. ₹480
Why it is wrong: ₹480 multiplies 800 by 0.60 but omits the ₹5 face value to which the percentage applies.
Answer: A. ₹2,400 uses the stated face-value base and the full eligible holding. Dividend per share = 60% × ₹5 = ₹3. Gross dividend for 800 shares = 800 × ₹3 = ₹2,400. The ₹150 market price is not used in the declared cash amount. It would be relevant to a separate dividend-yield calculation. Remember: Read the base of every percentage: face value, price and principal are not interchangeable.
Hint, shown before you answer in practice mode: Common mistake: Multiplying the declared dividend percentage by market price without checking the wording.
X-A-042easynumerical
Q14A company initially has 10,00,000 ordinary shares outstanding. It buys back and cancels 2,00,000 shares. An investor who does not participate continues to hold 10,000 shares. With no other change in share count, what percentage of the outstanding shares does this investor own afterwards?
Option A. 1.00%
Why it is wrong: 1.00% leaves the original denominator unchanged despite the cancellation.
Option B. 0.80%
Why it is wrong: 0.80% applies the company’s 20% share-count reduction to the investor’s percentage in the wrong direction.
Option C. 1.25% — Correct answer
Option D. 2.00%
Why it is wrong: 2.00% would require a different denominator. It does not follow from 8,00,000 outstanding shares.
Answer: C. 1.25% uses the unchanged investor holding and smaller outstanding share count. Before the buyback, ownership = 10,000 ÷ 10,00,000 × 100 = 1.00%. After cancellation, outstanding shares = 10,00,000 − 2,00,000 = 8,00,000. The investor retains 10,000 shares, giving 10,000 ÷ 8,00,000 × 100 = 1.25%. This concerns percentage ownership, not a forecast of the share price. Remember: An unchanged numerator divided by a smaller positive denominator produces a larger ownership fraction.
Hint, shown before you answer in practice mode: Common mistake: Reducing the non-participating investor’s share count when only tendered shares were bought back and cancelled.
X-A-043mediumnumerical
Q15Under a completed merger’s stated exchange terms, an investor receives three shares of the acquiring company for every five shares held in the target company. The investor owns 425 eligible target-company shares. How many acquiring-company shares are received?
Option A. 85 shares
Why it is wrong: 85 is the number of five-share blocks, not the acquiring-share entitlement.
Option B. 255 shares — Correct answer
Option C. 425 shares
Why it is wrong: 425 assumes a one-for-one exchange, which is not the agreed ratio.
Option D. 1,275 shares
Why it is wrong: 1,275 multiplies by three but fails to divide by the five target shares required per block.
Answer: B. 255 applies three acquiring shares to each of the 85 blocks. The terms provide three acquiring-company shares for every block of five target-company shares. 425 target shares form 425 ÷ 5 = 85 complete blocks. Entitlement = 85 × 3 = 255 acquiring-company shares. The original target holding is not added to this allotment as though both remained unchanged. Remember: Write the ratio with units: target shares × acquiring shares / target shares.
Hint, shown before you answer in practice mode: Common mistake: Applying only the numerator of an exchange ratio or reversing the acquiring and target quantities.
X-A-044mediumnumerical
Q16An investor sees that SEBI has issued observations on a public-offer document. Which conclusion can the investor properly draw about those observations?
Option A. They should not be treated as SEBI’s recommendation on investment merit or suitability — Correct answer
Option B. They establish that the issuer’s future profitability is adequate for investing
Why it is wrong: Observations do not establish that future business profits will match an investor’s expectations.
Option C. They establish that the offer price represents fair value for every investor
Why it is wrong: Disclosure review does not establish that the offer price represents fair value for every investor.
Option D. They establish that the securities suit the financial goals of all retail applicants
Why it is wrong: An issuer’s public-offer review does not constitute an assessment of each retail investor’s goals and risk capacity.
Answer: A. This correctly separates regulatory observations from investment merit and investor-specific suitability. The claim in the question tries to turn an offer-document review into an investment-merit conclusion. An investor must still evaluate the disclosed business, terms and risks. The existence of SEBI observations does not settle the issuer’s future profitability, the offer’s valuation or individual suitability. This explanation concerns the meaning of the observations, not a promise that every disclosure is accurate or that losses cannot occur. Remember: Disclosure review is not a substitute for evaluating an investment and its suitability.
Hint, shown before you answer in practice mode: Common mistake: Treating a regulator’s involvement as an endorsement of commercial merit.
X-A-045mediumregulatory
Q17CASE: A rights issue offers one new share for every four held, at ₹130 a share. An investor holds 800 shares. How much must the investor pay to take up the full entitlement?
Option A. ₹1,04,000
Why it is wrong: This charges ₹130 on all 800 shares instead of the 200 new ones.
Option B. ₹36,000
Why it is wrong: This uses a ₹180 market price instead of the ₹130 offer price.
Option C. ₹26,000 — Correct answer
Option D. ₹8,000
Why it is wrong: ₹8,000 does not follow. The payment is 200 × ₹130.
Answer: C. The entitlement is 800 ÷ 4 = 200 new shares. 200 × ₹130 = ₹26,000. Remember: Entitlement quantity and subscription price are separate inputs. Use the price set for the new shares.
Hint, shown before you answer in practice mode: Common mistake: Applying the issue price to the original holding or using the market quote instead of the subscription price.
X-A-046mediumapplication
Q18CASE: A company with 1,00,00,000 shares makes a rights issue of one new share for every four held, at ₹130 a share. The whole issue is taken up. How much cash does the company raise?
Option A. ₹13 crore
Why it is wrong: ₹13 crore would be only 10,00,000 new shares.
Option B. ₹18 crore
Why it is wrong: ₹18 crore does not follow from 25,00,000 shares at ₹130.
Option C. ₹130 crore
Why it is wrong: This applies ₹130 to all 1,00,00,000 old shares.
Option D. ₹32.50 crore — Correct answer
Answer: D. New shares = 1,00,00,000 ÷ 4 = 25,00,000. 25,00,000 × ₹130 = ₹32.50 crore. Remember: Company proceeds depend on newly issued shares paid for, not the whole pre-existing share capital.
Hint, shown before you answer in practice mode: Common mistake: Confusing the denominator used to calculate an entitlement with the number of shares actually subscribed.
X-A-047mediumapplication
Q19CASE: A company has 1,00,00,000 shares trading at ₹180. It issues one rights share for every four held, at ₹130, and the issue is fully taken up. Assume the value after the issue equals the old market value plus the cash raised. What is the theoretical ex-rights price?
Option A. ₹180
Why it is wrong: ₹180 ignores the cheaper new shares.
Option B. ₹170 — Correct answer
Option C. ₹130
Why it is wrong: ₹130 is the offer price of the new shares only.
Option D. ₹155
Why it is wrong: ₹155 is a simple average of ₹180 and ₹130. It treats four old shares as one.
Answer: B. Value after = ₹180 crore + ₹32.50 crore = ₹212.50 crore. Shares after = 1.25 crore. Price = ₹212.50 crore ÷ 1.25 crore = ₹170. Remember: Weight the old and new prices by their corresponding share counts. Do not average the two prices equally.
Hint, shown before you answer in practice mode: Common mistake: Confusing a theoretical ex-rights calculation with a forecast of the actual market quote.
X-A-048hardapplication
Q20CASE: A company has 1,00,00,000 shares and issues one rights share for every four held. The issue is fully taken up. An investor holds 800 shares and takes up the full entitlement. What is the investor's ownership after the issue?
Option A. 0.0080%, unchanged from before the issue — Correct answer
Option B. 0.0064%, lower than before the issue
Why it is wrong: 0.0064% is the stake if the investor did not take up the rights.
Option C. 0.0100%, higher than before the issue
Why it is wrong: This puts the new 1,000 shares over the old share count.
Option D. 0.0320%, higher than before the issue
Why it is wrong: 0.0320% does not follow from either share count.
Answer: A. Before: 800 ÷ 1,00,00,000 = 0.0080%. After: 1,000 ÷ 1,25,00,000 = 0.0080%. Taking up the full entitlement keeps the stake the same. Remember: Compare numerator and denominator together when measuring dilution or preservation of ownership.
Hint, shown before you answer in practice mode: Common mistake: Updating the investor’s shares but not the company’s total, or confusing a fraction with its percentage.
X-A-049mediumapplication
Q21CASE: Shares trade at ₹180 before a rights issue, and the theoretical ex-rights price is ₹170. An investor holds 800 shares and lets the rights lapse with no payment for them. How does the value of the holding change?
Option A. It increases by ₹8,000.
Why it is wrong: The holding falls in value. It does not rise.
Option B. It decreases by ₹10,000.
Why it is wrong: ₹10,000 uses a ₹50 discount on 200 rights, not the ₹10 fall on 800 shares.
Option C. It decreases by ₹8,000. — Correct answer
Option D. It decreases by ₹26,000.
Why it is wrong: ₹26,000 is the cost of taking up the rights.
Answer: C. Before: 800 × ₹180 = ₹1,44,000. After: 800 × ₹170 = ₹1,36,000. The value falls by ₹8,000. Remember: Distinguish entitlement value, subscription cost and the final value of the shareholding.
Hint, shown before you answer in practice mode: Common mistake: Treating the cost of exercising rights as the amount lost by not exercising. Actual prices and realisable rights-sale receipts are not guaranteed by the model.
X-A-050hardapplication
Securities Market Segments: common questions
How many practice questions are there on Securities Market Segments?
21 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 Securities Market Segments?
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.
Introduction to Investment
5 questions on Introduction to Investment. Its quiz opens on that unit.
Open Introduction to Investment