NISM Certification Overview

Disclaimers

• The text states that this publication is based on sources considered reliable but does not guarantee accuracy.
• National Institute of Securities Markets (NISM) and Securities and Exchange Board of India (SEBI) do not guarantee completeness or accuracy of the information.
• Both NISM and SEBI disclaim any liability for errors or omissions in the information.
• The content in the text reflects the state of knowledge at the time of publication, which is subject to change.

About NISM Certifications

• NISM Certifications and Continuing Professional Education (CPE) Programs are developed and administered for professionals in the Indian securities markets.
• These programs aim to enhance knowledge, skills, and ethics of market intermediaries to foster confidence and effective intermediation for investors.
• Certification programs cover various topics, including mutual funds, equities, derivatives, securities operations, compliance, research analysis, investment advice, and portfolio management.

About the Workbook

• This workbook is intended to assist candidates preparing for the NISM Certification Examination for Research Analyst.
• The workbook covers a range of topics relevant to the examination, including research analysis procedures and communication within the field.

Communication with Management

• Analysts should conduct thorough research before meeting with company management, including understanding the company's products, industry, competitors, and financial information.
• Analysts should maintain independence and objectivity in their research and avoid revealing confidential information.
• Analysts can leverage their network to gather insights from individuals knowledgeable about the company's functions and plans.
• When meeting with management, analysts should have clear and specific questions to optimize the time.

Financial Instruments in the Indian Securities Market

• Investors in the Indian market have access to a variety of financial products, including equity, debt, and derivative products.

Equity Shares

• Equity shares represent fractional ownership in a company.
• Equity shareholders collectively own the company, bear the risk, and enjoy the rewards of ownership.
• Equity shares are issued by companies and traded on stock exchanges.
• SEBI and regulators under the Companies Act oversee equity shares.

Debentures/Bonds/Notes

• Debentures/Bonds/Notes are financial instruments for raising long-term debt.
• They can be unsecured or secured (backed by collateral).
• Debentures/Bonds/Notes are issued by companies, governments, Special Purpose Vehicles (SPVs), and other entities.
• They are traded directly by issuers and on stock exchanges (if listed).
• RBI, SEBI, and regulators under the Companies Act oversee debentures/Bonds/Notes.

Indices

• Stock market indices provide a snapshot of the overall performance of a specific segment of the market.
• Indices are representative of the underlying market and are periodically reviewed and modified.
• The NSE Nifty 50 is an index tracking the top 50 companies listed on the National Stock Exchange (NSE).
• Other common indices in India include Nifty Next 50, Nifty 100, Nifty 500, S&P BSE 100, S&P BSE 500, S&P BSE MidCap, and S&P BSE SmallCap.
• Sector-specific indices, like those for banking, information technology, pharma, and fast-moving consumer goods, allow investors to track performance within specific sectors.
• Uses of indices include:
  • Comparing returns between asset classes, such as stocks and bonds.
  • Benchmarking the performance of active equity funds or portfolios.
  • Indicating the health of the overall economy or specific sectors.
  • Providing real-time market sentiment.
  • Acting as the underlying asset for index funds, index futures, and index options.

Mutual Fund Units

• Mutual Funds (MFs) pool investor money for collective investment in securities.
• Each investor's share is represented by units issued by the fund.
• The Net Asset Value (NAV) of the units fluctuates with the value of the underlying portfolio.
• Mutual fund schemes can be open-ended or close-ended.
  • Open-ended schemes allow investors to buy and sell units at any time at NAV-linked prices.
  • Close-ended schemes have a fixed capital and units are traded on stock exchanges.

Exchange Traded Funds (ETFs)

• ETFs are investment instruments that track indices, commodities, or baskets of assets.
• ETFs are listed and traded on stock exchanges similar to individual stocks, providing real-time price updates.
• ETFs are passively managed, typically leading to lower expense ratios than actively managed funds.
• ETFs offer diversification benefits like index funds while allowing for individual unit buying and selling.

Hybrids/Structured Products

Preference Shares

• Preference shares have features of both equity and debt.
• They are a form of equity with preference for dividend payouts and capital repayment compared to common equity shares.
• Preference shares resemble equity as they are owned by shareholders and dividend is paid from profit after tax.
• Unlike common equity shares, preference shares do not offer voting rights or a claim on residual assets.
• Preference shares resemble debt because they offer a fixed dividend payable before any common equity dividend.
• There are various types of preference shares, including cumulative (unpaid dividends are carried forward) and non-cumulative (unpaid dividends lapse).

Convertible Debentures & Bonds

• Convertible debentures are debt instruments that can be converted into equity shares at a pre-defined time.
• They offer both debt and equity characteristics.
• They pay periodic interest like other debt instruments until conversion.
• Upon conversion, they become equity shares.

Explore the essential aspects of NISM certifications and Continuing Professional Education programs. This quiz highlights the role of NISM and SEBI in enhancing knowledge and ethics among securities market professionals, ensuring effective investor intermediation. Test your understanding of various topics covered in these certifications.