Fundamental analysis of commodities
9 questions. Each answer is explained.
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Learn these topics
More units in NISM Series XV
- Introduction to Research Analyst Profession2
- Introduction to Securities Market3
- Terminology in Equity and Debt Markets3
- Fundamentals of Research7
- Economic Analysis7
- Industry Analysis12
- Company Analysis – Business and Governance9
- Company Analysis – Financial Analysis16
- Corporate Actions7
- Valuation Principles13
- Fundamentals of Risk and Return10
- Qualities of a Good Research Report7
- Legal and Regulatory Environment15
- Technical Analysis22
- Case Study - Valuation8
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 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 XV Research Analyst
Exam rules read on NISM's site on 3 October 2026. Exam pattern revised on 20 January 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 9 questions on Fundamental analysis of commodities, with answers
Q1A commodity's three-month futures price is above its spot price. Assuming the curve is upward sloping for comparable maturities, this market structure is called:
Option A. Backwardation
Why it is wrong: Backwardation is the opposite configuration.
Option B. Basis convergence failure
Why it is wrong: Futures and spot are expected to converge toward expiry. The stated price relationship alone is not a convergence failure.
Option C. Inversion by definition
Why it is wrong: 'Inversion' is commonly associated with the opposite slope in this context.
Option D. Contango — Correct answer
Answer: D. Contango describes a futures curve in which futures prices for later delivery are above the spot price or nearer maturities. It can be consistent with positive net cost of carry, although actual curves also reflect supply-demand conditions and convenience yield. Remember: Contango and backwardation describe the shape of the futures curve, not a guaranteed forecast of future spot prices.
Hint, shown before you answer in practice mode: Common mistake: Assuming a futures price above spot necessarily means traders expect spot to rise by the same amount.
XV-023mediumconceptual
Q2A commodity's spot price is ₹8,200 per unit, while otherwise comparable futures prices decline with maturity and the three-month contract trades at ₹7,900. This curve is best described as:
Option A. Contango
Why it is wrong: Contango describes the opposite direction of the curve.
Option B. A credit spread
Why it is wrong: A credit spread concerns yield differences on debt instruments.
Option C. A stock split
Why it is wrong: A stock split is an equity corporate action.
Option D. Backwardation — Correct answer
Answer: D. Backwardation is a downward-sloping futures structure in which deferred futures prices are below spot or nearer-term prices. It can occur when immediate availability has high value relative to carrying costs. Remember: Backwardation describes curve structure, not necessarily a prediction that future spot prices must fall.
Hint, shown before you answer in practice mode: Common mistake: Treating the futures curve as a certain forecast of future spot prices.
XV-044mediumconceptual
Q3For a globally traded commodity quoted primarily in US dollars, a broad strengthening of the US dollar is commonly viewed, other things equal, as:
Option A. A possible drag on the commodity's price, as it costs more in other currencies — Correct answer
Option B. A guarantee that the commodity's dollar price will rise, as the dollar is stronger
Why it is wrong: The relationship is not a guaranteed positive one.
Option C. Completely irrelevant to demand from overseas buyers who pay in other currencies
Why it is wrong: Exchange rates can affect affordability and demand.
Option D. Equivalent to a fall in global inventories of the commodity
Why it is wrong: Currency strength and physical inventories are different variables.
Answer: A. A stronger US dollar can make a dollar-priced commodity more expensive for buyers using other currencies and is therefore often a headwind to the commodity's dollar price, all else equal. The relationship is not mechanical because supply, demand and inventories also matter. Remember: Commodity analysis combines currency effects with physical supply-demand fundamentals.
Hint, shown before you answer in practice mode: Common mistake: Treating the dollar-commodity relationship as a perfect inverse rule.
XV-045mediumconceptual
Q4An analyst is forecasting the near-term supply of a major seasonal crop. Which information set is most directly relevant?
Option A. Only the P/E ratios of listed tractor and agricultural-equipment companies
Why it is wrong: Equipment-company valuation is not a direct crop-supply measure.
Option B. Acreage, crop condition, weather during critical growing periods and yield estimates — Correct answer
Option C. The face value of listed commodity-exchange shares, as stated in their latest annual reports
Why it is wrong: Share face value is unrelated to physical crop supply.
Option D. Only the previous day's advance-decline ratio for all shares traded on the stock exchange
Why it is wrong: Equity breadth does not directly estimate crop production.
Answer: B. Agricultural supply depends strongly on planted acreage, weather, crop progress, yields, inventories and seasonality. These are core physical-market fundamentals. Remember: For agricultural commodities, focus on the physical supply chain and seasonal production variables.
Hint, shown before you answer in practice mode: Common mistake: Using financial-market indicators as substitutes for crop fundamentals.
XV-046mediumconceptual
Q5Exchange-monitored inventories of an industrial metal fall steadily for several months while consumption remains firm and new supply is constrained. What does this most reasonably suggest?
Option A. That demand for the metal must have fallen to zero during the months when inventories fell
Why it is wrong: Firm consumption contradicts this statement.
Option B. A guaranteed collapse in the metal's price within the next few months, whatever else happens
Why it is wrong: The described fundamentals do not imply a guaranteed collapse.
Option C. A potentially tightening physical market that may support prices, subject to other factors — Correct answer
Option D. That the falling inventories have turned the metal into a financial security rather than a commodity
Why it is wrong: Inventory changes do not alter the nature of the asset.
Answer: C. Falling inventories alongside firm demand and constrained supply are consistent with a tightening physical balance. That can support prices, although substitution, hidden inventories, imports and macro conditions still matter. Remember: Inventory data are interpreted together with demand, supply and the location/quality of stocks.
Hint, shown before you answer in practice mode: Common mistake: Assuming falling reported inventories alone prove a price increase.
XV-047mediumconceptual
Q6A farmer expects to sell a crop after three months and is worried that the commodity price may fall before sale. Ignoring basis risk and contract-size mismatch, which futures hedge is directionally appropriate?
Option A. Buy futures now
Why it is wrong: A long futures position benefits from rising prices and would generally add to the producer’s price exposure.
Option B. Sell futures now — Correct answer
Option C. Buy only equity shares of a commodity company
Why it is wrong: Buying an equity security is not a direct futures hedge of the crop price.
Option D. Do nothing because producers cannot hedge output prices
Why it is wrong: Producers commonly use short hedges to manage price risk.
Answer: B. A producer with future physical inventory is naturally exposed to falling prices. Selling futures can offset some or all of that downside because a decline in the futures price can generate a gain on the short futures position, subject to basis and execution risks. Remember: Hedge direction should offset the underlying physical exposure.
Hint, shown before you answer in practice mode: Common mistake: A producer expecting to sell later often needs a short, not a long, futures hedge.
XV-088mediumconceptual
Q7A producer expects to sell 1,000 units of a commodity. Each futures contract represents 100 units. If the analyst chooses a hedge ratio of 0.8, how many futures contracts are required for the hedge?
Option A. 5 contracts
Why it is wrong: It under-hedges relative to the stated ratio.
Option B. 10 contracts
Why it is wrong: Ten contracts would correspond to a full 1.0 hedge ratio.
Option C. 8 contracts — Correct answer
Option D. 12 contracts
Why it is wrong: It would hedge more than the stated 0.8 ratio.
Answer: C. Number of contracts = Exposure units × Hedge ratio ÷ Contract size = 1,000 × 0.8 ÷ 100 = 8 contracts. Remember: A hedge ratio determines what fraction of the underlying exposure is offset with futures.
Hint, shown before you answer in practice mode: Common mistake: Using the full physical exposure when the stated hedge ratio is below 1.
XV-124hardnumerical
Q8A commodity's international US-dollar price is unchanged, but the rupee depreciates materially against the dollar. Ignoring tariffs, freight and local basis changes, the commodity's rupee-denominated domestic price would tend to:
Option A. Rise — Correct answer
Option B. Fall
Why it is wrong: That would normally require rupee appreciation, all else equal.
Option C. Become zero
Why it is wrong: Exchange-rate movement does not make the commodity price zero.
Option D. Be unaffected by the exchange rate
Why it is wrong: Currency conversion directly affects the rupee equivalent.
Answer: A. If the dollar price is unchanged but each dollar costs more rupees, the rupee equivalent of the same international price rises. Remember: Domestic commodity prices can move because of either the international price or the exchange rate, even if the other factor is unchanged.
Hint, shown before you answer in practice mode: Common mistake: Looking only at the international-dollar quote and ignoring currency translation.
XV-125mediumconceptual
Q9A geopolitical event unexpectedly disrupts exports from a country that is a major global supplier of a commodity. If near-term demand is unchanged and replacement supply is limited, the most likely immediate fundamental effect is:
Option A. Excess supply and downward price pressure
Why it is wrong: The shock reduces available supply rather than creating excess supply.
Option B. Tighter supply and upward price pressure — Correct answer
Option C. Guaranteed elimination of volatility
Why it is wrong: Supply shocks often increase volatility.
Option D. No effect because geopolitics cannot affect commodities
Why it is wrong: Geopolitical events can materially affect commodity supply chains.
Answer: B. A disruption to a major source of supply tightens the near-term physical balance if demand and replacement supply do not adjust, creating upward price pressure. Remember: Commodity prices respond to changes in physical supply, demand and the ability of the market to substitute.
Hint, shown before you answer in practice mode: Common mistake: Assuming geopolitical news matters only to financial markets and not to physical commodity flows.
XV-126mediumconceptual
Fundamental analysis of commodities: common questions
How many practice questions are there on Fundamental analysis of commodities?
9 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 16 practice topics for NISM Series XV, which has 150 questions in total.
Are these real NISM Series XV questions on Fundamental analysis of commodities?
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 XV?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 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.
Fundamentals of Risk and Return
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