NISM Series XI · Unit 5 of 9 · about 10% of the paper
Market indicators: NISM Series XI notes and practice questions
Indices and signals used to read the market.
What to know in Unit 5
- Sensex and Nifty.
- Breadth and volatility.
- Participant flows.
Key terms, examples and exam traps
Sensex
The Sensex is the BSE's 30-stock benchmark, weighted by free-float market capitalisation.
Example. An index of 30 companies on the Bombay exchange.
Exam trap. This statement is false: The Sensex has 50 stocks.
Nifty 50
The Nifty 50 represents 50 large companies on the NSE, weighted by free-float market capitalisation.
Example. An index of 50 leading companies on the National exchange.
Exam trap. This statement is false: The Nifty 50 has 30 stocks.
Free-float method
The free-float method counts only publicly available shares, excluding promoter holdings, to weight stocks in an index.
Example. A stock with high promoter holding gets less weight.
Exam trap. This statement is false: The free-float method counts all shares.
Sectoral and broad indices
Sectoral indices track specific industries like banks, while broad indices such as the Nifty 500 represent the wider market.
Example. An index tracking only banks is sectoral.
Exam trap. This statement is false: Sectoral indices cover the whole market.
Market breadth
Breadth compares the number of advancing and declining stocks, showing how widespread a market move is.
Example. The index rises but declining stocks outnumber advancing ones.
Exam trap. This statement is false: Breadth shows the daily turnover.
India VIX
India VIX measures the market's expectation of near-term volatility, derived from index option prices.
Example. A rising reading indicates greater expected volatility.
Exam trap. This statement is false: India VIX measures interest rates.
Market turnover
Turnover is the total value of securities traded in a period, showing market activity and liquidity.
Example. The day's total traded value in the cash market.
Exam trap. This statement is false: Turnover is the total market capitalisation.
FPI and DII flows
Net buying or selling by FPIs and DIIs is tracked daily as it influences market direction.
Example. Foreign investors sell heavily and the index falls.
Exam trap. This statement is false: Institutional flows have no effect on prices.
Market P/E
The index P/E divides the index's total market value by total earnings and shows whether the market is richly valued.
Example. The Nifty trades at 22 times earnings.
Exam trap. This statement is false: Index P/E shows the number of stocks.
52-week high and low
The 52-week high and low are the highest and lowest prices in the past year, used as reference for momentum and risk.
Example. A stock hits a new yearly high.
Exam trap. This statement is false: 52-week high is the highest price ever.
Put-call ratio
The put-call ratio compares put and call volumes or open interest and is a sentiment indicator.
Example. A high ratio suggests defensive positioning.
Exam trap. This statement is false: The put-call ratio measures dividends.
Impact cost
Impact cost is the cost of executing a standard-size order beyond the ideal price and measures liquidity.
Example. A large order moves the price against the buyer.
Exam trap. This statement is false: Impact cost is the brokerage charged.
Beta of stock
Beta shows how sensitive a stock is to market movements; above 1 is more volatile than the index.
Example. A stock moves 1.5 times the market.
Exam trap. This statement is false: A beta of 1 means the stock is risk free.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which statement best describes “Impact cost”?
- Retail and certain other investors apply through UPI, where the money is blocked in the investor's account until allotment.
- The clearing corporation guarantees and settles trades, becoming the central counterparty.
- A limit order is executed only at the specified price or better.
- Impact cost is the cost of executing a standard-size order beyond the ideal price and measures liquidity.
Q2. Which statement best describes “Beta of stock”?
- Beta shows how sensitive a stock is to market movements; above 1 is more volatile than the index.
- Turnover is the total value of securities traded in a period, showing market activity and liquidity.
- Brokers may offer margin funding under SEBI rules with disclosures, collecting margin and keeping the pledged securities in a separate account.
- Depositories like NSDL and CDSL hold securities in electronic form through participants.
Q3. Which term is described here? India VIX measures the market's expectation of near-term volatility, derived from index option prices.
- Collateral and pledge
- Trade-for-trade segment
- India VIX
- Securities
Q4. Which statement best describes “Market breadth”?
- Brokers must report suspicious trades and clients to the exchange and regulators and keep records of alerts and actions.
- A limit order is executed only at the specified price or better.
- Breadth compares the number of advancing and declining stocks, showing how widespread a market move is.
- Brokers must be registered with SEBI, be members of an exchange, meet capital adequacy and follow a code of conduct.
Q5. Which term is described here? The free-float method counts only publicly available shares, excluding promoter holdings, to weight stocks in an index.
- Limit order
- Additional surveillance measure
- Authorised person
- Free-float method
Q6. Which statement best describes “Market turnover”?
- Turnover is the total value of securities traded in a period, showing market activity and liquidity.
- In a pump and dump, promoters inflate a stock's price with hype, then sell to the public at the high.
- If the seller fails to deliver, the shortage is settled through an auction or closed out at a set price.
- A dealer should recommend only products and trades suitable to the client's profile and avoid pushing high-risk trades to inexperienced clients.
Frequently asked questions
How much of NISM Series XI comes from Unit 5?
Unit 5 (Market indicators) usually carries about 10% of the questions. The whole exam has 100 questions and the pass mark is 50%.
What should I study in NISM Series XI Unit 5?
Sensex and Nifty. Breadth and volatility. Participant flows.
Are these NISM Series XI practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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