Role of Portfolio Managers in India
8 questions. Each answer is explained.
Question 1 of 8Practice · 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 Stocks and Equity Research7
- Investing in Fixed Income Securities and Bond Valuation6
- Derivatives in Portfolio Management6
- Mutual Fund6
- 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 8 questions on Role of Portfolio Managers in India, with answers
Q1Which service lets the portfolio manager select investments within the client’s agreed mandate without seeking approval for each trade?
Option A. Custody without investment management
Why it is wrong: Custody safeguards and administers assets rather than selecting investments.
Option B. Non-discretionary portfolio management
Why it is wrong: Non-discretionary management follows the client’s investment directions rather than independent trade selection.
Option C. Discretionary portfolio management — Correct answer
Option D. Investment advice without trade management
Why it is wrong: Advice alone does not give the adviser authority to manage the client’s trades.
Answer: C. Discretionary management delegates investment selection to the manager within the agreed mandate. That discretion does not remove the client’s objectives or restrictions. Remember: Discretion is authority within a mandate, not unrestricted freedom.
Hint, shown before you answer in practice mode: Identify who has authority to make investment choices. Common mistake: Assuming discretionary authority overrides every client restriction.
XXI-B-033easyconceptual
Q2In non-discretionary portfolio management, whose directions guide the portfolio’s investment decisions?
Option A. The exchange’s daily investment suggestions
Why it is wrong: An exchange provides market infrastructure rather than the client’s investment mandate.
Option B. The client’s directions — Correct answer
Option C. The auditor’s preferred asset allocation
Why it is wrong: The auditor reviews records rather than directing the client’s investments.
Option D. The custodian’s investment preferences
Why it is wrong: The custodian does not replace the client as the source of investment directions.
Answer: B. The client’s directions guide investment decisions in non-discretionary management. The manager’s role should be understood from the agreed scope of service. Remember: Non-discretionary service does not transfer the same investment choice as discretionary service.
Hint, shown before you answer in practice mode: Recall what has not been delegated under this service model. Common mistake: Assuming every portfolio-management agreement delegates stock selection.
XXI-B-034easyconceptual
Q3Which arrangement is advisory-only when the provider does not manage or execute the client’s portfolio?
Option A. The provider holds assets and independently changes investments
Why it is wrong: Holding and managing assets goes beyond the advisory-only arrangement stated.
Option B. The provider guarantees all decisions made by the client
Why it is wrong: Advice does not create a guarantee of the client’s investment outcome.
Option C. The provider independently buys and sells within a mandate
Why it is wrong: Independent trading authority describes a discretionary management arrangement.
Option D. The provider recommends and the client decides and acts — Correct answer
Answer: D. An advisory-only provider gives recommendations while the client retains decisions and implementation. The exact service scope must be clear in the agreement. Remember: Advice and authority to manage a portfolio are different services.
Hint, shown before you answer in practice mode: Separate a recommendation from delegated management and execution. Common mistake: Treating a recommendation as permission to take control of the client’s assets.
XXI-B-035easyconceptual
Q4A PMS firm separates fund management, compliance, custody and audit. The investment team must choose securities within approved mandates. Which function should own those investment decisions?
Option A. The settlement function processing completed trades
Why it is wrong: Settlement implements completed transactions rather than setting investment decisions.
Option B. The custody function maintaining asset records
Why it is wrong: Custody records and safeguards holdings but is not the designated investment-selection function.
Option C. The authorised fund-management function — Correct answer
Option D. The external audit function reviewing accounts
Why it is wrong: Auditors independently examine records rather than choose portfolio investments.
Answer: C. The authorised fund-management function owns investment decisions within the approved mandate. Custody, settlement and audit have different control or support responsibilities. Remember: Separate investment decision-making from asset administration and independent checking.
Hint, shown before you answer in practice mode: Match authority and accountability to the purpose of each function. Common mistake: Assuming the team handling the securities must also choose them.
XXI-B-036mediumapplication
Q5A PMS firm has separate investment and compliance teams. A manager wants to trade an instrument that may fall outside an applicable restriction. Which function should first clarify the compliance position?
Option A. The performance-marketing function
Why it is wrong: Marketing does not determine whether the trade meets applicable restrictions.
Option B. The client-acquisition function
Why it is wrong: Acquisition staff cannot resolve a legal or mandate restriction by commercial preference.
Option C. The compliance function — Correct answer
Option D. The independent custody function
Why it is wrong: Custody may identify issues but does not replace the firm’s compliance assessment.
Answer: C. The compliance function should clarify the restriction before the trade proceeds. Investment attractiveness does not resolve a compliance uncertainty. Remember: Questionable permissions should be resolved before execution.
Hint, shown before you answer in practice mode: Identify who checks adherence before a questionable transaction proceeds. Common mistake: Treating a promising investment as an exception to a restriction.
XXI-B-037mediumapplication
Q6A PMS firm appoints an independent custodian and retains its own investment team. The custodian receives asset and settlement records. Which duty best matches that appointment?
Option A. Setting the client’s investment objectives independently
Why it is wrong: Client objectives are established through the portfolio-management process, not custody alone.
Option B. Safeguarding and administering the portfolio’s assets — Correct answer
Option C. Promising the portfolio’s minimum investment return
Why it is wrong: A custodian does not guarantee portfolio investment returns.
Option D. Choosing the portfolio’s strategic asset allocation
Why it is wrong: Asset allocation is an investment-management responsibility rather than the stated custody role.
Answer: B. The custodian safeguards and administers assets according to its role. Appointment of a custodian does not transfer portfolio-selection responsibility to it. Remember: Custody and fund management should not be confused.
Hint, shown before you answer in practice mode: Distinguish protecting records and holdings from choosing market exposure. Common mistake: Expecting the custodian to prevent every market loss.
XXI-B-038mediumapplication
Q7A PMS firm reports a client’s holdings and fees. An independent reviewer needs to trace these figures to transactions and supporting evidence. What is most useful for that review?
Option A. Complete, reconcilable records and supporting documents — Correct answer
Option B. Only the manager’s final performance presentation
Why it is wrong: A presentation alone does not provide the underlying transaction evidence.
Option C. Only the firm’s latest sales projections
Why it is wrong: Sales projections do not substantiate historical client-account records.
Option D. Only the client’s current investment preferences
Why it is wrong: Preferences do not establish the accuracy of recorded holdings and fees.
Answer: A. Complete, reconcilable records let the reviewer trace holdings and fees to underlying evidence. A summary presentation cannot replace the transaction trail. Remember: Reliable reporting requires an auditable link to underlying records.
Hint, shown before you answer in practice mode: Think about the evidence needed to reproduce a reported number. Common mistake: Assuming an attractive report is evidence that its numbers are correct.
XXI-B-039mediumapplication
Q8A PMS firm outsources record processing, but retains responsibility for client reporting. The provider’s error creates a mismatch in client holdings. Which response best respects that retained responsibility?
Option A. Investigate, reconcile and correct the affected client records — Correct answer
Option B. Correct aggregate totals without checking individual accounts
Why it is wrong: An aggregate adjustment can conceal which clients or holdings were affected.
Option C. Ask the client to settle the matter solely with the provider
Why it is wrong: Outsourcing processing does not remove the firm’s stated reporting responsibility.
Option D. Send the provider’s report unchanged until the next audit
Why it is wrong: This knowingly leaves unresolved information in client reporting.
Answer: A. The firm should investigate and correct the affected records because it retained responsibility for client reporting. It should also address the failed control rather than only the visible total. Remember: An outsourced process still needs accountable supervision and reconciliation.
Hint, shown before you answer in practice mode: Distinguish delegating a task from giving up responsibility for its result. Common mistake: Assuming an external provider absorbs every responsibility for an outsourced activity.
XXI-B-040hardapplication
Role of Portfolio Managers in India: common questions
How many practice questions are there on Role of Portfolio Managers in India?
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 Role of Portfolio Managers in India?
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.
Operational Aspects of Portfolio Managers (Onboarding and Fees)
8 questions on Operational Aspects of Portfolio Managers (Onboarding and Fees). Its quiz opens on that unit.
Open Operational Aspects of Portfolio Managers (Onboarding and Fees)Paper Trading Try it on the practice trading desk