Primary Markets
30 questions. Each answer is explained.
Question 1 of 10Practice · Series XII — Securities Markets Foundation
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Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series XII Securities Markets Foundation
Exam rules read on NISM's site on 17 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 17 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 30 questions on Primary Markets, with answers
Q1What is a company’s first public offer of its shares called?
Option A. Rights issue
Why it is wrong: A rights issue offers shares to existing shareholders in a stated proportion.
Option B. Further public offer
Why it is wrong: A further public offer follows an earlier public offer.
Option C. Bonus issue
Why it is wrong: A bonus issue capitalises reserves rather than making a first public offer.
Option D. Initial public offer — Correct answer
Answer: D. An initial public offer is a company’s first public offer of shares. It may involve new shares, existing shares offered for sale, or both. Remember: An initial public offer is the first public share offer.
Hint, shown before you answer in practice mode: Common mistake: Assuming a company's first public share sale must contain only newly created shares. Focus on the word first.
XII-046easyconceptual
Q2What is a later public share offer by an already publicly listed company called?
Option A. Initial public offer
Why it is wrong: The company has already completed its initial public offer.
Option B. Share split
Why it is wrong: A share split changes share denomination rather than making a public offer.
Option C. Rights entitlement transfer
Why it is wrong: A transfer of rights entitlements is not the company’s further public offer.
Option D. Further public offer — Correct answer
Answer: D. A further public offer is a subsequent public share offer by a company that has already made its initial public offer. Remember: Initial and further public offers differ in whether the company has offered shares publicly before.
Hint, shown before you answer in practice mode: Common mistake: Calling every public share offer an initial public offer. Distinguish entering the public market from returning to it.
XII-047easyconceptual
Q3Who receives the sale proceeds when existing shareholders sell shares through an offer for sale?
Option A. The company issuing new shares
Why it is wrong: An offer for sale transfers existing shares rather than issuing new ones.
Option B. The selling shareholders — Correct answer
Option C. Every shareholder in equal proportions
Why it is wrong: Only the shareholders selling those shares receive the sale proceeds.
Option D. The stock exchange as its own capital
Why it is wrong: The exchange does not receive the shareholders’ sale proceeds as capital.
Answer: B. The selling shareholders receive the proceeds because they sell shares they already own. The company does not raise fresh capital from that sale component. Remember: Offer-for-sale proceeds belong to the sellers of existing shares.
Hint, shown before you answer in practice mode: Common mistake: Treating the entire public-offer value as money raised by the company. Identify who gives up the existing shares.
XII-048easyconceptual
Q4Who is offered shares in a rights issue in proportion to existing holdings?
Option A. Only the company’s employees regardless of holdings
Why it is wrong: Employee status alone does not define rights-issue eligibility.
Option B. Eligible existing shareholders — Correct answer
Option C. Only lenders who hold no company shares
Why it is wrong: Rights are based on eligible shareholdings rather than being a lender.
Option D. Only investors who have never owned the company’s shares
Why it is wrong: A rights offer is initially based on existing holdings.
Answer: B. A rights issue offers shares to eligible existing shareholders in a specified proportion. Investors must consider the subscription terms. Remember: Rights entitlement starts with eligible existing share ownership.
Hint, shown before you answer in practice mode: Common mistake: Confusing a rights issue with an unrestricted first offer to the public. Think about whose ownership proportion the offer can help preserve.
XII-049easyconceptual
Q5What normally happens when a company makes a bonus issue?
Option A. Every shareholder’s percentage ownership automatically doubles
Why it is wrong: A proportionate bonus issue normally preserves ownership percentages.
Option B. Shareholders must pay the full market price for every bonus share
Why it is wrong: A bonus issue does not require a subscription payment for the bonus shares.
Option C. The company receives new cash from all shareholders
Why it is wrong: Capitalising reserves does not bring in fresh investor cash.
Option D. Reserves are capitalised into additional shares — Correct answer
Answer: D. A bonus issue capitalises eligible reserves into additional shares. It does not raise fresh cash from shareholders. Remember: A bonus issue changes the form of existing equity capital.
Hint, shown before you answer in practice mode: Common mistake: Assuming more shares automatically create new company wealth. Consider whether money enters the company or existing reserves change form.
XII-050easyconceptual
Q6Which public-issue method uses investor bids to help discover the issue price?
Option A. Fixed-price issuance
Why it is wrong: A fixed-price issue announces a set offer price rather than discovering it through bids.
Option B. Book building — Correct answer
Option C. Bonus allocation
Why it is wrong: A bonus issue does not discover a cash subscription price through investor bids.
Option D. Share subdivision
Why it is wrong: A share subdivision changes denominations rather than determining a public-offer price.
Answer: B. Book building collects investor bids to help determine the issue price. A fixed-price issue uses a price decided before applications. Remember: Book building is a demand-based price-discovery process.
Hint, shown before you answer in practice mode: Common mistake: Confusing the price band with an already finalised offer price. Think about collecting demand at different prices.
XII-051easyconceptual
Q7Which public-issue document provides details such as the issuer’s business, financial information and risk factors?
Option A. Demat account statement
Why it is wrong: A demat statement records securities holdings and movements.
Option B. Contract note
Why it is wrong: A contract note records executed market trades rather than describing a public issue.
Option C. Bank deposit receipt
Why it is wrong: A deposit receipt relates to a bank deposit, not public-issue disclosures.
Option D. Prospectus — Correct answer
Answer: D. A prospectus provides information about the issuer and the offer, including important risks. It supports an investor’s assessment of the issue. Remember: Read the offer document to understand the issuer and its risks.
Hint, shown before you answer in practice mode: Common mistake: Relying only on the issue’s advertisement or popularity. Look for the document intended to explain the public offer.
XII-052easyconceptual
Q8What does an underwriter’s subscription commitment primarily address in a securities issue?
Option A. The risk of the issuer defaulting on every future coupon
Why it is wrong: An issue subscription commitment does not guarantee all future debt payments.
Option B. The risk of an agreed portion remaining unsubscribed — Correct answer
Option C. The risk of investors receiving a lower annual dividend
Why it is wrong: Underwriting does not guarantee the issuer’s future dividends.
Option D. The risk of investors facing a lower listing price
Why it is wrong: An underwriting subscription commitment is not insurance against a later market-price fall.
Answer: B. An underwriter commits to subscribe for an agreed shortfall under the underwriting terms. That does not guarantee the security’s later price. Remember: Underwriting concerns subscription obligations rather than investment returns.
Hint, shown before you answer in practice mode: Common mistake: Confusing an underwriting commitment with a profit guarantee. Think about whether the issue receives enough subscriptions.
XII-053easyconceptual
Q9Which intermediary typically processes applications and helps maintain allotment records for a public issue?
Option A. Investment research analyst
Why it is wrong: A research analyst studies investments rather than administering allotment records.
Option B. Credit rating agency
Why it is wrong: A rating agency assesses creditworthiness rather than processing share applications.
Option C. Registrar to the issue — Correct answer
Option D. Securities custodian for an unrelated fund
Why it is wrong: An unrelated fund’s custodian does not administer the issuer’s applications.
Answer: C. The registrar to the issue processes application information and supports allotment administration. It also maintains relevant investor records. Remember: Registrars perform important recordkeeping and administrative functions in issues.
Hint, shown before you answer in practice mode: Common mistake: Assuming the stock exchange personally processes every investor application. Focus on application records and issue administration.
XII-054easyconceptual
Q10A public offer consists entirely of newly issued shares. Which immediate effect distinguishes it from a pure offer for sale?
Option A. The company’s issued share count must stay unchanged
Why it is wrong: A fresh issue creates additional shares.
Option B. Only the selling promoter receives the subscription money
Why it is wrong: Fresh-issue money goes to the company, subject to issue expenses.
Option C. The company’s issued share count increases — Correct answer
Option D. All existing shareholders automatically sell their holdings
Why it is wrong: A fresh issue does not require existing shareholders to sell.
Answer: C. A fresh issue increases the company’s issued share count because new shares are created. A pure offer for sale transfers existing shares. Remember: Fresh issuance changes the share count while an existing-share sale does not.
Hint, shown before you answer in practice mode: Common mistake: Treating every public offer as only a transfer of existing ownership. Check whether the offer creates shares or transfers existing ones.
XII-055mediumapplication
Q11An offer includes 3 lakh fresh shares and 2 lakh existing shares at ₹100 each. Ignoring expenses, how much reaches the company?
Option A. ₹3 crore — Correct answer
Option B. ₹50 lakh
Why it is wrong: This does not multiply the fresh-share quantity by the stated issue price.
Option C. ₹5 crore
Why it is wrong: This incorrectly includes the proceeds belonging to selling shareholders.
Option D. ₹2 crore
Why it is wrong: This is the proceeds of the existing-share sale component.
Answer: A. The company receives ₹3 crore from its fresh shares. Company proceeds = 3,00,000 × ₹100 = ₹3,00,00,000. The ₹2 crore from existing shares goes to their sellers. Remember: Separate fresh-issue proceeds from offer-for-sale proceeds.
Hint, shown before you answer in practice mode: Common mistake: Adding the offer-for-sale component to the company’s fresh funds. Use only the new shares when calculating the company’s proceeds.
XII-056mediumnumerical
Q12A hypothetical share has ₹10 face value and is issued at ₹85. What is the issue premium per share?
Option A. ₹8.50
Why it is wrong: This divides price by face value instead of finding the premium amount.
Option B. ₹95
Why it is wrong: This adds face value to the issue price.
Option C. ₹75 — Correct answer
Option D. ₹85
Why it is wrong: This is the whole issue price rather than the premium over face value.
Answer: C. The issue premium is ₹75 per share. Premium = ₹85 issue price − ₹10 face value = ₹75. Remember: Issue premium is the issue price above face value.
Hint, shown before you answer in practice mode: Common mistake: Calling the entire issue price the premium. Distinguish the stated face value from the additional amount paid.
XII-057mediumnumerical
Q13A rights issue offers two new shares for every five held. How many new shares can a holder of 300 shares subscribe for?
Option A. 150 shares
Why it is wrong: This incorrectly treats the entitlement as one new share for every two.
Option B. 750 shares
Why it is wrong: This reverses the rights ratio.
Option C. 120 shares — Correct answer
Option D. 60 shares
Why it is wrong: This applies one new share for every five instead of two.
Answer: C. The entitlement is 120 new shares. New shares = 300 × 2 ÷ 5 = 120. Remember: Read a rights ratio as new shares offered for existing shares held.
Hint, shown before you answer in practice mode: Common mistake: Reversing the numerator and denominator of the rights ratio. Apply the stated new-shares-to-existing-shares ratio.
XII-058mediumnumerical
Q14A holder owns 240 shares and receives one bonus share for every three held. What is the total shareholding afterwards?
Option A. 80 shares
Why it is wrong: This is only the new bonus entitlement, not the total holding.
Option B. 960 shares
Why it is wrong: This treats the issue as three bonus shares for each existing share.
Option C. 720 shares
Why it is wrong: This multiplies the existing holding by three incorrectly.
Option D. 320 shares — Correct answer
Answer: D. The holder has 320 shares after receiving 80 bonus shares. Bonus shares = 240 ÷ 3 = 80. Total shares = 240 + 80 = 320. Remember: Total post-bonus holdings include both old and bonus shares.
Hint, shown before you answer in practice mode: Common mistake: Reporting only the bonus entitlement as the final holding. Calculate the additional shares, then add the original holding.
XII-059mediumnumerical
Q15A book-built offer has a ₹90–₹100 price band. What does the band tell applicants before the final price is determined?
Option A. The lower and upper bidding prices for the offer — Correct answer
Option B. The guaranteed lowest and highest prices after listing
Why it is wrong: The price band does not constrain future secondary-market prices.
Option C. The permanent face value of each share
Why it is wrong: Face value and the public-offer price band are different concepts.
Option D. The exact return investors will receive after allotment
Why it is wrong: A bidding band does not establish an investment return.
Answer: A. The band states the lower and upper prices for issue bidding. It is not a guarantee about the share’s later trading range. Remember: An issue price band applies to the offer process, not future returns.
Hint, shown before you answer in practice mode: Common mistake: Mistaking an issue price band for a guaranteed post-listing range. Keep issue bidding separate from later market trading.
XII-060mediumapplication
Q16Under Applications Supported by Blocked Amount, what happens initially to the money authorised for an issue application?
Option A. It is deducted permanently as an application charge
Why it is wrong: The authorised application amount is not a non-refundable fee.
Option B. It is blocked in the applicant’s bank account — Correct answer
Option C. It is transferred to the issuer before any allotment
Why it is wrong: Initial blocking reserves the amount rather than transferring it to the issuer immediately.
Option D. It remains freely withdrawable until shares are allotted
Why it is wrong: A blocked amount is not freely available for withdrawal while the block remains.
Answer: B. Applications Supported by Blocked Amount reserves the authorised money in the applicant’s bank account. The allotment outcome determines the subsequent debit or release. Remember: Blocked application money is reserved pending the issue outcome.
Hint, shown before you answer in practice mode: Common mistake: Assuming all application money leaves the bank account immediately. Distinguish reserving money from transferring it immediately.
XII-061mediumconceptual
Q17A shareholder transfers an eligible rights entitlement to another investor instead of subscribing. What is this action called?
Option A. Capitalisation of reserves
Why it is wrong: Capitalisation of reserves describes a bonus issue, not transfer of an entitlement.
Option B. Subdivision of shares
Why it is wrong: A subdivision changes share denominations rather than transferring an entitlement.
Option C. Renunciation of rights — Correct answer
Option D. Redemption of debentures
Why it is wrong: No debt principal is being repaid in this action.
Answer: C. Transferring the rights entitlement is called renunciation of rights. The entitlement is distinct from an already allotted share. Remember: A rights entitlement can be different from the share obtained after subscription.
Hint, shown before you answer in practice mode: Common mistake: Treating a transferred entitlement as if the new share has already been allotted. Focus on giving another person the subscription entitlement.
XII-062mediumapplication
Q18What is the main purpose of a green shoe arrangement in a public offer?
Option A. Guarantee full allotment to every public applicant
Why it is wrong: The arrangement does not assure each applicant the quantity requested.
Option B. Support post-listing price stabilisation under the arrangement — Correct answer
Option C. Guarantee a fixed minimum price throughout the share’s life
Why it is wrong: Stabilisation does not provide permanent price protection.
Option D. Set the final price before any investor bids are collected
Why it is wrong: The stabilisation arrangement is not the book-building price-discovery process.
Answer: B. A green shoe arrangement supports post-listing price stabilisation within its terms. It does not guarantee the price or eliminate investment risk. Remember: Price-stabilisation support is not the same as a price guarantee.
Hint, shown before you answer in practice mode: Common mistake: Assuming an offer with a stabilisation arrangement cannot produce a loss. Think about managing price pressure after the shares begin trading.
XII-063mediumconceptual
Q19Whose interests does a debenture trustee primarily represent in a debt issue?
Option A. The debenture holders — Correct answer
Option B. The issue’s lead managers
Why it is wrong: Lead managers arrange the issue rather than being the protected debt-investor group.
Option C. The issuer’s ordinary shareholders
Why it is wrong: Ordinary shareholders are not the debt holders represented by this trustee role.
Option D. The issuer’s trade creditors
Why it is wrong: Trade creditors do not become debenture holders merely by supplying goods or services.
Answer: A. A debenture trustee represents the interests of debenture holders. Its duties relate to the debt issue and its terms. Remember: Debenture trustees protect the interests associated with the debt claim.
Hint, shown before you answer in practice mode: Common mistake: Assuming the trustee’s primary duty is to maximise shareholder returns. Identify the investors who hold the debt claim.
XII-064mediumconceptual
Q20A debt issue has a favourable credit rating. Which conclusion is NOT correct?
Option A. The rating guarantees repayment in every situation — Correct answer
Option B. The investor should also consider the issue’s terms
Why it is wrong: Issue terms remain important even when a rating is favourable.
Option C. The issuer’s condition may change after the rating
Why it is wrong: Credit quality can change after a rating is assigned.
Option D. The rating is relevant to assessing credit risk
Why it is wrong: Credit ratings are relevant inputs to credit-risk assessment.
Answer: A. A favourable credit rating does not guarantee repayment. It is an assessment that can change with the issuer’s condition and other information. Remember: A credit rating is not repayment insurance.
Hint, shown before you answer in practice mode: Common mistake: Treating a favourable rating as proof that default is impossible. Distinguish an assessment of risk from a guarantee.
XII-065mediumapplication
Q21An investor says exchange listing guarantees that a new share will rise. What is the best correction?
Option A. Listing requires every trade to occur above the issue price
Why it is wrong: Listed shares can trade below their issue price.
Option B. Listing enables exchange trading but does not assure a price gain — Correct answer
Option C. Listing makes the exchange repay investors for ordinary market losses
Why it is wrong: Listing does not create such a repayment promise.
Option D. Listing removes changes in the company’s business risk
Why it is wrong: A listed company can still face changing business risks.
Answer: B. Listing enables exchange trading but does not assure a price gain. The market price may be above or below the issue price. Remember: Listing is not a guarantee of profitability.
Hint, shown before you answer in practice mode: Common mistake: Confusing regulated market access with an investment endorsement. Separate access to a market from the outcome of an investment.
XII-066mediumapplication
Q22What mainly distinguishes a private placement from an offer made to the public?
Option A. Securities are offered only to existing shareholders proportionately
Why it is wrong: That describes a rights issue rather than private placement in general.
Option B. Securities are traded only between existing holders
Why it is wrong: That describes secondary trading rather than an issuer’s placement of securities.
Option C. Securities are offered to a selected group of investors — Correct answer
Option D. Securities are offered through unrestricted public invitations
Why it is wrong: An unrestricted public invitation differs from a selected-investor placement.
Answer: C. A private placement offers securities to selected investors rather than the general public. The applicable process and restrictions still matter. Remember: The target investor group helps distinguish private and public offers.
Hint, shown before you answer in practice mode: Common mistake: Assuming a private offer is outside all regulation. Compare the audience receiving the offer.
XII-067mediumconceptual
Q23Which investor group is central to a Qualified Institutions Placement?
Option A. Qualified institutional buyers — Correct answer
Option B. Only the issuer’s existing retail shareholders
Why it is wrong: A Qualified Institutions Placement is not a retail rights issue.
Option C. Only the issuer’s employees holding no qualifications
Why it is wrong: Employment alone does not define the required investor category.
Option D. Every member of the public without qualification
Why it is wrong: The placement is not an unrestricted public offer.
Answer: A. A Qualified Institutions Placement is directed to qualified institutional buyers. It differs from a general public offer or retail rights issue. Remember: Qualified Institutions Placement is an institutional fundraising route.
Hint, shown before you answer in practice mode: Common mistake: Treating every private fundraising route as open to all retail investors. Distinguish institutional placements from retail fundraising routes.
XII-068mediumconceptual
Q24What is the basic purpose of a shelf prospectus in eligible debt fundraising?
Option A. Support only one allotment followed by mandatory cancellation
Why it is wrong: A shelf prospectus is intended to support eligible repeated issuance, not only one allotment.
Option B. Support multiple issues with the required accompanying disclosures — Correct answer
Option C. Replace all updates when later tranches are offered
Why it is wrong: Later tranches can require additional disclosures and material updates.
Option D. Reserve every debt tranche for existing equity shareholders
Why it is wrong: A shelf prospectus does not itself turn debt fundraising into a shareholder rights issue.
Answer: B. A shelf prospectus provides a framework for multiple eligible issues with the required accompanying disclosures. It is not permission to ignore material changes. Remember: A shelf prospectus supports repeated issuance within the applicable framework.
Hint, shown before you answer in practice mode: Common mistake: Assuming one filing removes all later disclosure obligations. Think about a framework for more than one fundraising tranche.
XII-069mediumconceptual
Q25A shareholder owns 20,000 of a company’s 1 lakh shares. The company issues 25,000 new shares to others. What is the shareholder’s new percentage?
Option A. 80%
Why it is wrong: This treats the new shares as the denominator instead of the total shares.
Option B. 20%
Why it is wrong: This ignores the increase in total shares.
Option C. 25%
Why it is wrong: This does not divide the unchanged holding by the expanded share count.
Option D. 16% — Correct answer
Answer: D. The holding becomes 16% because the shareholder still owns 20,000 out of 1,25,000 shares. New total = 1,00,000 + 25,000 = 1,25,000. Holding = 20,000 ÷ 1,25,000 × 100 = 16%. Remember: New shares issued to others can dilute an existing ownership percentage.
Hint, shown before you answer in practice mode: Common mistake: Using the old total share count after a fresh issue. The investor’s share count stays unchanged, but the total increases.
XII-070hardnumerical
Q26A company has 8 lakh shares and offers 2 lakh fresh plus 1 lakh existing shares. What percentage of post-offer shares are purchased through this offer?
Option A. 30% — Correct answer
Option B. 37.5%
Why it is wrong: This uses the pre-issue share count instead of the post-issue count.
Option C. 27.27%
Why it is wrong: This incorrectly adds the offer-for-sale shares to the total share count.
Option D. 20%
Why it is wrong: This counts fresh shares but omits the existing shares bought in the offer.
Answer: A. The shares purchased through the offer represent 30% of post-issue shares. Offered shares = 2 lakh + 1 lakh = 3 lakh. Post-issue shares = 8 lakh + 2 lakh = 10 lakh. Percentage = 3 ÷ 10 × 100 = 30%. Remember: Existing-share sales change ownership but do not enlarge the share count.
Hint, shown before you answer in practice mode: Common mistake: Adding offer-for-sale shares to the company’s issued capital. Count all shares bought in the offer, but add only fresh shares to the company total.
XII-071hardnumerical
Q27An application blocks ₹30,000. The investor receives 80 shares at ₹150 each. Assuming no other deductions, how much blocked money is released?
Option A. ₹18,000 — Correct answer
Option B. ₹42,000
Why it is wrong: This adds the allotment cost to the blocked amount instead of subtracting it.
Option C. ₹12,000
Why it is wrong: This is the amount used for allotted shares, not the amount released.
Option D. ₹30,000
Why it is wrong: This ignores the payment due for the allotted shares.
Answer: A. ₹18,000 is released because only ₹12,000 is needed for the allotted shares. Allotment cost = 80 × ₹150 = ₹12,000. Release = ₹30,000 − ₹12,000 = ₹18,000. Remember: Unused blocked money equals the blocked amount less the allotment payment.
Hint, shown before you answer in practice mode: Common mistake: Confusing the amount debited with the amount made available again. First calculate the payment for the allotted shares.
XII-072hardnumerical
Q28A public offer is heavily subscribed and its advertisement highlights growth. The prospectus also describes major customer concentration. Which assessment is strongest?
Option A. High subscription proves the customer concentration cannot cause losses
Why it is wrong: Investor demand does not eliminate a company’s business exposures.
Option B. Advertising replaces the need to read the risk disclosures
Why it is wrong: Promotional material does not replace detailed offer disclosures.
Option C. High subscription does not remove the disclosed business risk — Correct answer
Option D. Exchange listing makes all disclosed business risks irrelevant
Why it is wrong: Listing does not prevent the company’s risks from affecting investors.
Answer: C. High subscription does not remove the disclosed customer-concentration risk. Investor demand and business risk are different considerations. Remember: Popularity is not a substitute for understanding disclosed risks.
Hint, shown before you answer in practice mode: Common mistake: Treating an oversubscribed issue as automatically low risk. Compare investor popularity with evidence about the company’s underlying risk.
XII-073hardapplication
Q29An investor receives 150 hypothetical bonds of ₹2,000 face value. The 9% annual coupon is paid half-yearly. What is each half-yearly coupon payment?
Option A. ₹27,000
Why it is wrong: This is a full year’s coupon rather than one half-yearly payment.
Option B. ₹1,350
Why it is wrong: This understates the aggregate coupon by a factor of ten.
Option C. ₹15,000
Why it is wrong: This uses a 10% annual coupon instead of 9%.
Option D. ₹13,500 — Correct answer
Answer: D. Each half-yearly payment is ₹13,500. Total face value = 150 × ₹2,000 = ₹3,00,000. Annual coupon = ₹3,00,000 × 9% = ₹27,000. Half-yearly payment = ₹27,000 ÷ 2 = ₹13,500. Remember: Coupon frequency determines how the annual coupon is divided.
Hint, shown before you answer in practice mode: Common mistake: Applying the full annual rate to every half-yearly payment. Calculate the total face value, then divide the annual coupon between two payments.
XII-074hardnumerical
Q30In a hypothetical bid book, 40,000 shares are bid at ₹110 and 35,000 at ₹105. Another 30,000 are bid at ₹100. What demand accepts at least ₹105?
Option A. 70,000 shares
Why it is wrong: This adds the ₹110 and ₹100 groups instead of the eligible higher-price groups.
Option B. 1,05,000 shares
Why it is wrong: This incorrectly includes bids limited to ₹100.
Option C. 75,000 shares — Correct answer
Option D. 35,000 shares
Why it is wrong: This includes only bids exactly at ₹105 and omits higher bids.
Answer: C. Demand at a price of at least ₹105 is 75,000 shares. Eligible demand = 40,000 at ₹110 + 35,000 at ₹105 = 75,000. The ₹100 bids are below that price. Remember: Cumulative demand at a price includes bids at that price and higher.
Hint, shown before you answer in practice mode: Common mistake: Counting only bids at the exact price or including bids below it. Include bids at the stated price and above it.
XII-075hardnumerical
Primary Markets: common questions
How many practice questions are there on Primary Markets?
30 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 6 practice topics for NISM Series XII, which has 150 questions in total.
Are these real NISM Series XII questions on Primary Markets?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series XII?
No. NISM applies no negative marking to Series XII. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. 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.
Secondary Markets
30 questions on Secondary Markets. Its quiz opens on that unit.
Open Secondary MarketsPaper Trading Try it on the practice trading desk