Introduction to Indices
6 questions. Each answer is explained.
Question 1 of 6Practice · Series XXI-B — Portfolio Managers
0 right · 0 wrong · 6 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series XXI-B
- Investment Landscape and Required Return4
- Introduction to Securities Markets and Participants3
- Investing in Stocks and Equity Research7
- Investing in Fixed Income Securities and Bond Valuation6
- Derivatives in Portfolio Management6
- Mutual Fund6
- Role of Portfolio Managers in India8
- Operational Aspects of Portfolio Managers (Onboarding and Fees)8
- Portfolio Management Process and Asset Allocation8
- Taxation6
- Regulatory, Governance and Ethical Aspects of Portfolio Managers8
- Concept of Informational Efficiency6
- Behavioral Finance6
- Introduction to Modern Portfolio Theory6
- Introduction to Capital Market Theory6
- Risk8
- Equity Portfolio Management Strategies14
- Fixed Income Portfolio Management Strategies14
- Performance measurement and evaluation of Portfolio Managers8
- Portfolio Rebalancing6
Exam format
| Questions | 120 · 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 XXI-B Portfolio Managers
Exam rules read on NISM's site on 30 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 30 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 6 questions on Introduction to Indices, with answers
Q1What does an equity total-return index include that its corresponding price-only index excludes?
Option A. The effect of assigning weights to index constituents
Why it is wrong: Both index types use an index-weighting methodology.
Option B. The effect of all investors’ personal income taxes
Why it is wrong: A general total-return index does not capture every investor’s personal tax situation.
Option C. The effect of reinvesting constituent dividends — Correct answer
Option D. The effect of changes in constituent share prices
Why it is wrong: Both price and total-return indices reflect the relevant share-price changes.
Answer: C. A total-return index includes the effect of reinvesting constituent dividends in addition to price movements. A price-only index does not include that dividend-return component. Remember: Dividend treatment matters when comparing equity performance with an index.
Hint, shown before you answer in practice mode: Consider the income received while a share is held. Common mistake: Comparing a dividend-inclusive portfolio return with a price-only benchmark.
XXI-B-071easyconceptual
Q2At a scheduled reset, how does an equal-weight index allocate weight across its constituents?
Option A. Each constituent receives the same weight — Correct answer
Option B. Each constituent receives a weight based on its market value
Why it is wrong: That describes market-capitalisation weighting rather than equal weighting.
Option C. Each constituent receives a weight based on its share price
Why it is wrong: That describes price-based weighting rather than equal weighting.
Option D. Each constituent receives a weight based on its trading volume
Why it is wrong: That is a different weighting rule and need not give equal weights.
Answer: A. An equal-weight index gives each constituent the same weight at the scheduled reset. The weights can subsequently drift as constituent returns differ. Remember: Equal weights are restored by the methodology rather than remaining automatically equal.
Hint, shown before you answer in practice mode: Focus on the rule at the reset date rather than later price drift. Common mistake: Assuming equal-weight indices need no rebalancing after prices change.
XXI-B-072easyconceptual
Q3Two companies have market values of ₹1,000 crore and ₹500 crore, with free floats of 25% and 80%. What is the first company’s free-float weight?
Option A. 38.46% — Correct answer
Option B. 66.67%
Why it is wrong: This uses full market capitalisation and ignores each company’s free-float percentage.
Option C. 61.54%
Why it is wrong: This is the second company’s share of the combined free-float market value.
Option D. 25.00%
Why it is wrong: This is the first company’s own free-float percentage, not its index weight.
Answer: A. The first company’s weight is 38.46% because its free-float value is ₹250 crore out of ₹650 crore. First value = ₹1,000 crore × 25% = ₹250 crore. Second value = ₹500 crore × 80% = ₹400 crore. Weight = ₹250 ÷ ₹650 × 100 = 38.46%. Remember: Free-float weighting uses adjusted market values, not raw share prices.
Hint, shown before you answer in practice mode: Adjust both company values for free float before comparing them. Common mistake: Mistaking a company’s free-float percentage for its final index weight.
XXI-B-073mediumnumerical
Q4A price-weighted index has prices ₹100 and ₹200 and divisor 2. After the first share splits two-for-one, what divisor preserves continuity?
Option A. 1.5000
Why it is wrong: This does not preserve the original index value with the new price sum.
Option B. 1.6667 — Correct answer
Option C. 2.0000
Why it is wrong: Keeping the old divisor would create a mechanical index fall after the split.
Option D. 3.0000
Why it is wrong: Increasing the divisor in this way would make the artificial index fall larger.
Answer: B. The new divisor is approximately 1.6667 because the split should not change the index’s economic level. Old index = (₹100 + ₹200) ÷ 2 = 150. New prices are ₹50 and ₹200. New divisor = 250 ÷ 150 = 1.6667. Remember: Divisor adjustments prevent corporate actions from creating artificial index returns.
Hint, shown before you answer in practice mode: Keep the index level unchanged when only the share denomination changes. Common mistake: Treating a stock split as a loss of economic value for index holders.
XXI-B-074hardnumerical
Q5A two-stock index starts with 30% and 70% weights. Their price returns are 10% and −5%. What is the unrebalanced index return?
Option A. 2.50%
Why it is wrong: This takes an unweighted average of the two returns.
Option B. 5.00%
Why it is wrong: This subtracts the two percentage magnitudes without applying weights.
Option C. −0.50% — Correct answer
Option D. 0.50%
Why it is wrong: This reverses the sign of the weighted result.
Answer: C. The index return is −0.50% because the larger holding’s loss outweighs the smaller holding’s gain. Working: 0.30 × 10% + 0.70 × (−5%) = 3.00% − 3.50% = −0.50%. Remember: Constituent weights determine their contribution to an index return.
Hint, shown before you answer in practice mode: Measure each stock’s contribution using its starting weight. Common mistake: Averaging stock returns without considering their index weights.
XXI-B-075mediumnumerical
Q6A mandate maintains a long-term 60% equity and 40% bond mix. Which benchmark structure best reflects that investment opportunity set?
Option A. A commodity-only index with no bond component
Why it is wrong: A commodity benchmark does not match the stated asset classes.
Option B. A narrow equity-sector index alone
Why it is wrong: A single equity sector does not represent the mandate’s equity-and-bond opportunity set.
Option C. A composite of suitable equity and bond indices — Correct answer
Option D. A short-term cash rate used as the entire benchmark
Why it is wrong: Cash alone does not represent the mandate’s strategic equity and bond exposures.
Answer: C. A composite of suitable equity and bond indices can represent the mandate’s policy mix. Its weights and rebalancing convention should be clearly specified. Remember: A mixed-asset mandate often needs a mixed-asset benchmark.
Hint, shown before you answer in practice mode: Match the benchmark’s underlying exposures to the portfolio’s policy. Common mistake: Choosing a familiar index even when it does not match the mandate.
XXI-B-076mediumapplication
Introduction to Indices: common questions
How many practice questions are there on Introduction to Indices?
6 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 21 practice topics for NISM Series XXI-B, which has 150 questions in total.
Are these real NISM Series XXI-B questions on Introduction to Indices?
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 XXI-B?
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.
Concept of Informational Efficiency
6 questions on Concept of Informational Efficiency. Its quiz opens on that unit.
Open Concept of Informational EfficiencyPaper Trading Try it on the practice trading desk