Investing in Stocks and Equity Research
7 questions. Each answer is explained.
Question 1 of 7Practice · Series XXI-B — Portfolio Managers
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Learn these topics
More units in NISM Series XXI-B
- Investment Landscape and Required Return4
- Introduction to Securities Markets and Participants3
- 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
- Introduction to Indices6
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 7 questions on Investing in Stocks and Equity Research, with answers
Q1Which research sequence is most consistent with a top-down equity analysis?
Option A. Economy, industry, company — Correct answer
Option B. Share price, trade size, settlement
Why it is wrong: This is a trading sequence rather than a top-down fundamental analysis.
Option C. Company, industry, economy
Why it is wrong: Starting with the company describes a bottom-up starting point.
Option D. Dividend payment, tax filing, audit
Why it is wrong: These activities do not describe the economy-to-company research sequence.
Answer: A. Top-down analysis moves from the economy to industries and then to individual companies. It uses the broader environment to guide more specific research. Remember: Top-down research begins with the economic setting.
Hint, shown before you answer in practice mode: Start with the broadest environment and narrow the analysis. Common mistake: Calling any detailed company report a top-down study.
XXI-B-008easyconceptual
Q2Which practice most clearly helps protect minority shareholders from a controlling shareholder’s conflicts?
Option A. Keeping material ownership relationships undisclosed
Why it is wrong: Hidden relationships prevent investors and reviewers from assessing conflicts.
Option B. Automatic approval of promoter-linked transactions
Why it is wrong: Automatic approval removes scrutiny precisely where a conflict may exist.
Option C. Letting the interested director approve alone
Why it is wrong: Sole approval by the interested person does not provide independent oversight.
Option D. Independent review of related-party transactions — Correct answer
Answer: D. Independent review helps assess whether related-party transactions treat the company and minority shareholders fairly. It does not make every such transaction harmful or risk-free. Remember: Good governance includes oversight of conflicts involving controlling owners.
Hint, shown before you answer in practice mode: Look for a check on decisions made by an interested person. Common mistake: Assuming a controlling shareholder’s approval is enough to establish fairness.
XXI-B-009easyconceptual
Q3A share costs ₹480 and annual earnings per share are ₹20. What is its price-to-earnings ratio?
Option A. 500 times
Why it is wrong: Adding share price and earnings does not calculate a valuation multiple.
Option B. 20 times
Why it is wrong: Twenty is the earnings per share, not the price divided by earnings.
Option C. 24 times — Correct answer
Option D. 4.17 times
Why it is wrong: This reverses the ratio and scales it as a percentage.
Answer: C. The price-to-earnings ratio is 24 times because the price is 24 times annual earnings per share. Working: ₹480 ÷ ₹20 = 24. Remember: Use consistent per-share price and earnings figures for a price-to-earnings ratio.
Hint, shown before you answer in practice mode: Relate the amount paid for one share to the earnings belonging to it. Common mistake: Inverting the ratio and reporting an earnings yield instead.
XXI-B-010mediumnumerical
Q4Net assets are ₹10 crore across 2 lakh ordinary shares. At ₹750 per share, what is the price-to-book ratio?
Option A. 1.50 times — Correct answer
Option B. 0.67 times
Why it is wrong: This divides book value by price instead of price by book value.
Option C. 15.00 times
Why it is wrong: This loses a factor of ten when converting crore and lakh.
Option D. 5.00 times
Why it is wrong: This confuses the ₹500 book value per share with the required ratio.
Answer: A. The price-to-book ratio is 1.50 times because book value per share is ₹500. Book value per share = ₹10,00,00,000 ÷ 2,00,000 = ₹500. Price-to-book = ₹750 ÷ ₹500 = 1.50. Remember: Keep crore, lakh and per-share units consistent.
Hint, shown before you answer in practice mode: Calculate book value per ordinary share before comparing the market price. Common mistake: Dividing a per-share price directly by the company’s total net assets.
XXI-B-011mediumnumerical
Q5Next year’s dividend is ₹6, perpetual dividend growth is 5%, and required return is 11%. What is the constant-growth value?
Option A. ₹100 — Correct answer
Option B. ₹120
Why it is wrong: Dividing by the growth rate does not apply the constant-growth valuation model.
Option C. ₹105
Why it is wrong: This grows an amount already stated as next year’s dividend a second time.
Option D. ₹54.55
Why it is wrong: Dividing only by the required return ignores perpetual growth.
Answer: A. The constant-growth value is ₹100 because the next dividend is discounted using the required-return spread over growth. Value = next dividend ÷ (required return − growth). Working: ₹6 ÷ (0.11 − 0.05) = ₹100. Remember: The constant-growth dividend model requires required return to exceed growth.
Hint, shown before you answer in practice mode: Identify whether the dividend is current or already next year’s amount. Common mistake: Growing next year’s dividend again before using the model.
XXI-B-012mediumnumerical
Q6Which input is most directly associated with technical analysis rather than fundamental valuation?
Option A. Forecast operating cash flows and capital spending
Why it is wrong: These are inputs to fundamental cash-flow valuation.
Option B. Patterns in historical prices and trading volume — Correct answer
Option C. Management quality and industry profit margins
Why it is wrong: These are company and industry fundamentals.
Option D. Expected dividends and the required equity return
Why it is wrong: These are inputs to dividend-based fundamental valuation.
Answer: B. Technical analysis studies market behaviour such as price and volume patterns. These patterns do not guarantee a future price direction. Remember: Technical signals and fundamental value estimates answer different questions.
Hint, shown before you answer in practice mode: Distinguish market behaviour from the business’s financial drivers. Common mistake: Treating a chart pattern as a certain forecast of future returns.
XXI-B-013mediumconceptual
Q7Market value of equity is ₹500 crore, debt ₹200 crore, cash ₹50 crore, and EBITDA ₹65 crore. What is EV/EBITDA?
Option A. 11.54 times
Why it is wrong: This adds cash instead of deducting it from enterprise value.
Option B. 7.69 times
Why it is wrong: This uses equity value alone and ignores debt and cash in enterprise value.
Option C. 10.77 times
Why it is wrong: This adds debt but fails to deduct the cash balance.
Option D. 10 times — Correct answer
Answer: D. EV/EBITDA is 10 times because enterprise value is ₹650 crore. EBITDA means earnings before interest, tax, depreciation and amortisation. With no other adjustments, enterprise value = equity value + debt − cash = ₹500 + ₹200 − ₹50 = ₹650 crore. Divide ₹650 crore by ₹65 crore to obtain 10. Remember: Enterprise value normally adds debt and deducts cash from equity value.
Hint, shown before you answer in practice mode: Separate the operating business value from its financing and surplus cash. Common mistake: Using market capitalisation alone with a measure earned by the whole business.
XXI-B-014hardnumerical
Investing in Stocks and Equity Research: common questions
How many practice questions are there on Investing in Stocks and Equity Research?
7 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 Investing in Stocks and Equity Research?
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.
Investing in Fixed Income Securities and Bond Valuation
6 questions on Investing in Fixed Income Securities and Bond Valuation. Its quiz opens on that unit.
Open Investing in Fixed Income Securities and Bond ValuationPaper Trading Try it on the practice trading desk