Operational Aspects of Portfolio Managers (Onboarding and Fees)
8 questions. Each answer is explained.
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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 Stocks and Equity Research7
- Investing in Fixed Income Securities and Bond Valuation6
- Derivatives in Portfolio Management6
- Mutual Fund6
- Role of Portfolio Managers in India8
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 8 questions on Operational Aspects of Portfolio Managers (Onboarding and Fees), with answers
Q1Which document should clearly set out the manager’s authority, client obligations and agreed fee terms?
Option A. A media article about the manager’s strategy
Why it is wrong: A media article does not establish the parties’ contractual terms.
Option B. A daily list of exchange closing prices
Why it is wrong: Market prices do not define management authority or fees.
Option C. A general presentation for prospective investors
Why it is wrong: A general presentation does not replace the client-specific agreement.
Option D. The client’s portfolio-management agreement — Correct answer
Answer: D. The portfolio-management agreement records the agreed authority, obligations and fee terms. Investors should understand these terms before relying on the service. Remember: The agreement defines the specific management relationship.
Hint, shown before you answer in practice mode: Look for the document governing the relationship between both parties. Common mistake: Treating a marketing presentation as a substitute for the agreed contract.
XXI-B-041easyconceptual
Q2What is the main purpose of a high-water mark in a performance-fee arrangement?
Option A. To guarantee that the portfolio never falls in value over any period
Why it is wrong: A high-water mark governs fees and does not prevent investment losses.
Option B. To require a fee whenever any single holding in the portfolio rises
Why it is wrong: It applies to the defined fee base, not every profitable individual security.
Option C. To replace all agreed management and operating fees of the portfolio
Why it is wrong: It concerns performance-fee eligibility rather than automatically removing other fees.
Option D. To avoid charging again for recovery of previously rewarded gains — Correct answer
Answer: D. A high-water mark helps avoid charging a performance fee again merely for recovering previously rewarded gains. Its operation depends on the agreed and applicable fee framework. Remember: Recovery of a past loss is different from creating a new fee-eligible high.
Hint, shown before you answer in practice mode: Consider how a loss followed by a recovery should affect repeat charging. Common mistake: Confusing a performance-fee reference level with capital protection.
XXI-B-042easyconceptual
Q3Before escalating an eligible unresolved securities-market complaint through SCORES, whom should an investor first approach for redressal?
Option A. The issuer of every security in the portfolio
Why it is wrong: Portfolio-service complaints should first go to the entity concerned, not automatically every issuer.
Option B. The concerned regulated entity — Correct answer
Option C. The market index administrator
Why it is wrong: An index administrator does not handle another regulated entity’s client-service complaint.
Option D. Any unrelated market intermediary
Why it is wrong: An unrelated intermediary is not responsible for resolving the original complaint.
Answer: B. The investor should first approach the concerned regulated entity, as SEBI’s SCORES guidance explains. An eligible unresolved grievance can then be escalated through the prescribed process. Remember: Keep evidence of the initial complaint and the entity’s response.
Hint, shown before you answer in practice mode: Begin with the party that provided the service being disputed. Common mistake: Skipping the service provider and expecting an unrelated institution to resolve the matter.
XXI-B-043mediumregulatory
Q4A hypothetical PMS agreement starts the year with ₹100 lakh. Its annual fixed management fee is 1% of that opening value, with no cash flows or other charges. What fixed fee is payable?
Option A. ₹1 lakh — Correct answer
Option B. ₹0.10 lakh
Why it is wrong: This applies 0.1% rather than the stated 1%.
Option C. ₹10 lakh
Why it is wrong: This applies 10% rather than the stated 1%.
Option D. ₹1.15 lakh
Why it is wrong: This uses a different fee base rather than the stated opening value.
Answer: A. The fixed fee is ₹1 lakh because the agreement applies 1% to the ₹100 lakh opening value. Working: ₹100 lakh × 0.01 = ₹1 lakh. The rate is a case assumption, not a statutory limit. Remember: A fee percentage is meaningful only when its calculation base is known.
Hint, shown before you answer in practice mode: Use the fee base specified in this hypothetical agreement. Common mistake: Applying a rate to closing wealth when the agreement specifies opening wealth.
XXI-B-044mediumapplication
Q5The hypothetical account opens at ₹100 lakh, with a 6% annual hard hurdle and a prior high-water mark of ₹108 lakh. Performance fees apply only to wealth above both thresholds, after the fixed fee. What is the effective threshold?
Option A. ₹114 lakh
Why it is wrong: This adds a return hurdle to the prior high-water mark without such a contract term.
Option B. ₹108 lakh — Correct answer
Option C. ₹100 lakh
Why it is wrong: This ignores both the hurdle return and the high-water mark.
Option D. ₹106 lakh
Why it is wrong: This clears the hurdle but ignores the higher high-water mark.
Answer: B. The effective threshold is ₹108 lakh because it is higher than the ₹106 lakh hurdle wealth. Hurdle wealth = ₹100 lakh × 1.06 = ₹106 lakh. The case requires the portfolio to clear both ₹106 lakh and ₹108 lakh. Remember: A hurdle rate and a high-water mark can constrain the same performance-fee calculation.
Hint, shown before you answer in practice mode: Calculate the hurdle wealth and compare the two separate thresholds. Common mistake: Using the hurdle while forgetting that the high-water mark is higher.
XXI-B-045mediumapplication
Q6The hypothetical account opens at ₹100 lakh and ends at ₹115 lakh before fees, without cash flows. Charge a 1% opening-value fixed fee first, then a 10% performance fee on wealth above both a 6% opening-value hard hurdle and the ₹108 lakh high-water mark. What is the performance fee?
Option A. ₹0.60 lakh — Correct answer
Option B. ₹0.70 lakh
Why it is wrong: This calculates performance fees before deducting the fixed fee.
Option C. ₹1.40 lakh
Why it is wrong: This charges on the entire ₹14 lakh gain after the fixed fee rather than only eligible surplus.
Option D. ₹0.80 lakh
Why it is wrong: This uses only the ₹106 lakh hurdle and ignores the ₹108 lakh high-water mark.
Answer: A. The performance fee is ₹0.60 lakh because only ₹6 lakh remains above the controlling threshold. Fixed fee = 1% × ₹100 lakh = ₹1 lakh. Wealth after the fixed fee = ₹115 lakh − ₹1 lakh = ₹114 lakh. The higher threshold is max(₹106 lakh, ₹108 lakh) = ₹108 lakh. Eligible gain = ₹114 lakh − ₹108 lakh = ₹6 lakh. Performance fee = 10% × ₹6 lakh = ₹0.60 lakh. Remember: Fee order and the higher applicable threshold can materially change performance fees.
Hint, shown before you answer in practice mode: Apply the fee order, then identify which threshold controls. Common mistake: Charging on total gains rather than gains above the relevant thresholds.
XXI-B-046hardapplication
Q7The same hypothetical account opens at ₹100 lakh and ends at ₹115 lakh before fees, without cash flows. Deduct the agreed ₹1 lakh fixed fee and ₹0.60 lakh performance fee, with no other charges or taxes. What is the client’s net return?
Option A. 13.40% — Correct answer
Option B. 14.40%
Why it is wrong: This deducts only the performance fee and ignores the fixed fee.
Option C. 14.00%
Why it is wrong: This deducts only the fixed fee and ignores the performance fee.
Option D. 15.00%
Why it is wrong: This is the return before the two stated fees.
Answer: A. The client’s net return is 13.40% because closing wealth after fees is ₹113.40 lakh. Closing wealth = ₹115 − ₹1 − ₹0.60 = ₹113.40 lakh. Net gain = ₹13.40 lakh. Return = ₹13.40 lakh ÷ ₹100 lakh × 100 = 13.40%. Remember: Client return is measured after the fees and costs specified in the calculation.
Hint, shown before you answer in practice mode: Calculate the amount remaining for the client before measuring the return. Common mistake: Describing a gross portfolio gain as the client’s net result.
XXI-B-047hardapplication
Q8For the next year, the hypothetical agreement fixes the relevant high-water mark at ₹113.40 lakh. Wealth falls to ₹107 lakh and later recovers to ₹112 lakh after the fixed fee, with no cash flows. What performance fee is due if new highs are required?
Option A. A fee on the ₹5 lakh recovery
Why it is wrong: The recovery remains below the applicable high-water mark.
Option B. No performance fee is due — Correct answer
Option C. A fee on the full ₹112 lakh wealth
Why it is wrong: A performance fee is not charged on the entire portfolio value in this case.
Option D. A fee on the ₹12 lakh gain over the original opening value
Why it is wrong: The original opening value does not replace the stated high-water mark.
Answer: B. No performance fee is due because ₹112 lakh remains below the ₹113.40 lakh high-water mark. A recovery from the recent low is not a new eligible high. Remember: A rebound can be profitable without creating performance-fee eligibility.
Hint, shown before you answer in practice mode: Compare recovered wealth with the contractual reference high, not only the recent low. Common mistake: Restarting the performance-fee reference from a temporary portfolio low.
XXI-B-048mediumapplication
Operational Aspects of Portfolio Managers (Onboarding and Fees): common questions
How many practice questions are there on Operational Aspects of Portfolio Managers (Onboarding and Fees)?
8 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 Operational Aspects of Portfolio Managers (Onboarding and Fees)?
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.
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