NISM Series XXI-A · Unit 2 of 12 · about 5% of the paper
Introduction to securities markets: NISM Series XXI-A notes and practice questions
The markets in which portfolio managers operate and the regulators who oversee them.
What to know in Unit 2
- Primary and secondary markets.
- Market participants and regulators.
Key terms, examples and exam traps
Primary market
The primary market is where securities are first issued to investors and the issuer receives the proceeds.
Example. An IPO raises funds for a company.
Exam trap. This statement is false: Investors trade with each other in the primary market.
Secondary market
The secondary market is where existing securities trade between investors on exchanges, providing liquidity.
Example. An investor sells shares through a stock exchange.
Exam trap. This statement is false: The company receives funds from secondary market trades.
Stock exchange
A stock exchange is a regulated platform where listed securities trade, such as the BSE and NSE.
Example. Buyers and sellers meet on an electronic platform.
Exam trap. This statement is false: A stock exchange issues shares to the public.
Depository
A depository holds securities in electronic form, enabling transfer by book entry; India has NSDL and CDSL.
Example. A client's shares are held electronically in a demat account.
Exam trap. This statement is false: A depository sets stock prices.
SEBI
SEBI regulates the securities market including portfolio managers, and frames regulations to protect investors.
Example. A portfolio manager must register with the capital-market regulator.
Exam trap. This statement is false: SEBI regulates only banks.
Settlement
Equity trades settle on T+1 through a clearing corporation, which guarantees settlement.
Example. Shares bought today are delivered the next working day.
Exam trap. This statement is false: Equity trades take a week to settle.
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 term is described here? SEBI regulates the securities market including portfolio managers, and frames regulations to protect investors.
- Concentrated portfolio
- Expense versus fee
- Value investing
- SEBI
Q2. Which term is described here? A depository holds securities in electronic form, enabling transfer by book entry; India has NSDL and CDSL.
- Contribution of securities
- Annualised return
- Depository
- Quality investing
Q3. Which term is described here? Equity trades settle on T+1 through a clearing corporation, which guarantees settlement.
- Settlement
- Direct onboarding
- Dividend income
- Options
Q4. Which statement best describes “Secondary market”?
- The investment policy records objectives, constraints, allocation ranges and rebalancing rules, guiding the manager.
- Derivatives allow large exposure for small margin, magnifying gains and losses.
- The secondary market is where existing securities trade between investors on exchanges, providing liquidity.
- Large caps are generally more stable and liquid; small caps offer higher growth potential with more volatility and lower liquidity.
Q5. Which statement best describes “Stock exchange”?
- PMS suits investors with large surplus funds, long horizons and ability to bear volatility and concentration risk.
- Hedging uses derivatives to offset an existing risk, reducing the portfolio's exposure to adverse moves.
- A stock exchange is a regulated platform where listed securities trade, such as the BSE and NSE.
- Strategic allocation sets long-term target weights across asset classes, based on objectives and risk profile.
Q6. Which statement best describes “SEBI”?
- An investment approach is a distinct style or strategy offered by a portfolio manager, such as large-cap growth or multi-cap value, with defined objectives and risks.
- Annualised return converts a return over any period into an equivalent yearly rate for comparison.
- The portfolio is reviewed regularly against objectives, benchmark and risk limits, and changes are made as needed.
- SEBI regulates the securities market including portfolio managers, and frames regulations to protect investors.
Frequently asked questions
How much of NISM Series XXI-A comes from Unit 2?
Unit 2 (Introduction to securities markets) usually carries about 5% of the questions. The whole exam has 100 questions and the pass mark is 60%.
What should I study in NISM Series XXI-A Unit 2?
Primary and secondary markets. Market participants and regulators.
Are these NISM Series XXI-A practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
Next
UpperCrust Academy is independent study material from UpperCrust Wealth. It is not affiliated with NISM, SEBI or AMFI. For education only. Not investment advice. Always confirm the latest syllabus and rules on the official NISM website.