NISM Series XV: Research Analyst Certification Exam

Questions and Answers

What is the primary purpose of the workbook?

To provide financial literacy to stakeholders

To enhance governance standards in the financial services sector

To engage in capacity building among stakeholders in the securities markets

To assist candidates in preparing for the NISM-Series-XV: Research Analyst Certification Examination (correct)

What is the name of the institution that developed the workbook?

Securities Markets Institute of India

Institute of Financial Research and Analysis

National Institute of Financial Markets

National Institute of Securities Markets (correct)

What is the address of the NISM Registered Office?

Plot No.C-6, E-Block, Bandra Kurla Complex, Bandra East, Mumbai, 400052

Patalganga Campus, Plot IS-1 & IS-2, Patalganga Industrial Area

Village Mohopada (Wasambe), Taluka-Khalapur, District Raigad-410223

5th floor, NCL Cooperative Society, Plot No.C-6, E-Block, Bandra Kurla Complex, Bandra East, Mumbai, 400051 (correct)

What is the website of the National Institute of Securities Markets?

<a href="http://www.nism.ac.in">www.nism.ac.in</a> Signup and view all the answers

What is the purpose of NISM Certification programs?

To enhance the quality and standards of professionals employed in various segments of the financial services sector Signup and view all the answers

When is the workbook version applicable from?

June 30, 2023 Signup and view all the answers

What type of education does NISM provide?

Professional education Signup and view all the answers

What does NISM engage in, among other activities?

Capacity building among stakeholders in the securities markets Signup and view all the answers

Which of the following is NOT included in the definition of 'securities' under the Securities Contracts (Regulation) Act, 1956?

Units linked insurance policy Signup and view all the answers

What is the primary function of securities markets in the context of resource allocation?

To facilitate the transfer of resources from savers to investors Signup and view all the answers

Which of the following is NOT considered a key component of the financial market?

Financial analysts and researchers Signup and view all the answers

What is the main purpose of securities markets according to the provided text?

To channel savings into investments Signup and view all the answers

Which of the following is an example of a 'pooled investment vehicle' as defined in the Securities Contracts (Regulation) Act, 1956?

A mutual fund Signup and view all the answers

What is the role of regulatory bodies in the financial market?

To ensure the efficient functioning of the market Signup and view all the answers

What does the term 'securities' encompass according to the provided definition?

A wide range of financial instruments including derivatives and units of pooled investment vehicles Signup and view all the answers

What is the significance of the Securities Contracts (Regulation) Act, 1956 (SCRA) in the context of securities markets?

It establishes the legal framework for the regulation and functioning of securities markets in India Signup and view all the answers

What is the primary purpose of a market index?

To provide a benchmark for the overall market performance Signup and view all the answers

What is the main criterion used for weighting stocks in most leading indices?

The market capitalization of the company Signup and view all the answers

Which of the following is NOT a reason why stocks included in an index are generally quite liquid?

It makes it easier for investors to track index performance Signup and view all the answers

What is the main difference between warrants and convertible warrants?

Warrants are issued by companies, while convertible warrants are issued by investors Signup and view all the answers

Which of the following indices is NOT included in the list of widely tracked indices in India?

CNX Nifty Signup and view all the answers

What is the significance of the 'floating stock' factor in selecting stocks for an index?

It refers to the number of shares available for trading in the market Signup and view all the answers

What does the term 'market cap weighted' mean in the context of indices?

The index is weighted based on the total market capitalization Signup and view all the answers

Why is it important for indices to be reviewed and modified periodically?

To ensure the index remains representative of the underlying market Signup and view all the answers

Which index is specifically designed to track mid-cap stocks in India?

S&P BSE MidCap Signup and view all the answers

What does NAV stand for in the context of mutual fund units?

Net Asset Value Signup and view all the answers

Which of the following is NOT a major use of stock market indices?

Calculating tax liabilities Signup and view all the answers

What distinguishes an open-ended mutual fund scheme from a closed-ended scheme?

Open-ended funds offer continuous buying and selling options. Signup and view all the answers

Which of the following indices is designed for tracking the performance of the top 50 companies in India?

Nifty 50 Signup and view all the answers

Which regulator oversees the mutual fund industry in India?

SEBI Signup and view all the answers

To which sector do indices for banking, information technology, and pharma belong?

Sectoral Indices Signup and view all the answers

What is the main difference between fixed capital of closed-ended funds and that of open-ended funds?

Open-ended funds have a variable capital structure. Signup and view all the answers

What is a key benefit of Commodity Linked Debentures (CLDs)?

They provide protection of initial capital while earning returns from commodity markets. Signup and view all the answers

Which of the following statements about Mortgage Backed Securities (MBS) is true?

The cash flows from MBS are utilized to meet interest and principal repayments on bonds. Signup and view all the answers

What percentage of assets must Real Estate Investment Trusts (REITs) hold in real estate to meet regulatory requirements?

80% Signup and view all the answers

What is a fundamental aspect of how Asset Backed Securities (ABS) work?

They allow institutions to create liquidity from standard financial assets. Signup and view all the answers

What regulatory requirement must Infrastructure Investment Trusts (InvITs) meet regarding their unit capital?

At least 90% must be invested in revenue-generating infrastructure projects. Signup and view all the answers

What is a characteristic of both REITs and InvITs regarding their income distribution?

They have to distribute at least 90% of distributable surplus cash flow to unit holders. Signup and view all the answers

What is a common trait of commodities?

They are basic materials or goods that are largely homogenous. Signup and view all the answers

What role do cash flows from financial assets serve in MBS and ABS?

They are used to fulfill interest and principal payment obligations on the issued securities. Signup and view all the answers

What are depositary receipts referred to when the issuing company delivers the securities and initiates the process?

Sponsored depositary receipts Signup and view all the answers

Where can unsponsored depositary receipts be traded?

Over-the-counter (OTC) markets Signup and view all the answers

What is the feature of depositary receipts that allows shares to be bought in the local market and converted into DRs?

Two-way fungibility Signup and view all the answers

What are Indian companies allowed to raise in the form of issue of ordinary equity shares through depository receipts?

Foreign currency resources Signup and view all the answers

What is the restriction on the conversion of IDRs into shares in India?

One year lock-in Signup and view all the answers

What are depositary receipts issued and traded in the USA called?

American depositary receipts Signup and view all the answers

Why are IDRs limited to resident Indian investors?

To meet regulatory requirements Signup and view all the answers

What is the purpose of SEBI guidelines for IDRs?

To regulate IDRs issuance Signup and view all the answers

What is the primary role of a Research Analyst?

To analyze financial data and provide recommendations to clients for investment decisions. Signup and view all the answers

Which of the following is NOT a primary responsibility of a Research Analyst?

Managing client accounts and executing trades. Signup and view all the answers

What is a key principle of interaction between a Research Analyst and a company?

Ensuring confidentiality and objectivity in all interactions. Signup and view all the answers

Which of the following qualities is NOT considered essential for a successful Research Analyst?

Extensive experience in trading and portfolio management. Signup and view all the answers

In the analogy of choosing a new phone, what aspect of the Research Analyst's role does the process of comparing technical specifications represent?

Data collection and information gathering. Signup and view all the answers

What does the term 'Research' encompass in the context of a Research Analyst's work?

Gathering information from various sources and evaluating its relevance. Signup and view all the answers

What is the role of 'Analysis' in the Research Analyst's work?

Developing financial models and forecasting future performance of companies. Signup and view all the answers

Which of the following is NOT a key factor that a Research Analyst considers when helping clients make investment decisions?

The company's marketing and advertising strategies. Signup and view all the answers

What is the primary function of securities markets in the context of resource allocation?

Securities markets facilitate the transfer of funds from savers to borrowers, enabling efficient resource allocation. Signup and view all the answers

What is a key benefit of securities for investors?

Securities offer a means to diversify investments and reduce risk. Signup and view all the answers

Which of the following is a key characteristic of securities markets?

Securities markets are highly regulated to protect investors and ensure fair practices. Signup and view all the answers

How do securities markets contribute to liquidity in the financial system?

Securities markets provide a platform for investors to easily buy and sell securities at close to market prices. Signup and view all the answers

What is the primary objective of the issuers of securities?

Issuers of securities seek to raise capital at a reasonable cost to fund their operations or projects. Signup and view all the answers

Which of the following is NOT considered a key participant in the securities market?

Central banks are responsible for setting interest rates and managing the money supply. Signup and view all the answers

How does the process of dematerialization enhance efficiency in the securities market?

All of the above. Signup and view all the answers

What is the primary function of securities in the financial system?

Securities provide a mechanism for transferring ownership of assets and raising capital. Signup and view all the answers

Which of the following is NOT a focus area for research analysts when understanding the economy?

Understanding the history of the country's economic development Signup and view all the answers

What is a key difference between industries?

The challenges and opportunities they face Signup and view all the answers

What is the primary role of a research analyst, as described in the text?

To understand and evaluate the growth of industries and companies Signup and view all the answers

Why is it important for research analysts to understand the economic environment?

Because economic factors can influence the growth of companies and industries Signup and view all the answers

Which of the following factors is NOT mentioned as something research analysts need to understand when evaluating an industry?

The company's management team Signup and view all the answers

What is the primary focus of economic analysis for research analysts, as described in the text?

Understanding how government policies impact economic growth Signup and view all the answers

Why is it important for research analysts to understand the industry in which a company operates?

To understand the specific challenges and opportunities faced by the industry Signup and view all the answers

What is the analogy used to illustrate the importance of understanding individual companies?

Comparing two different cricket players with unique strengths Signup and view all the answers

What is the primary goal of the NISM-Series-XV: Research Analyst Certification Examination?

To establish a minimum level of competency for all research analysts in India. Signup and view all the answers

Which of the following is NOT covered in the NISM-Series-XV: Research Analyst Certification Examination workbook?

Detailed analysis of specific investment strategies. Signup and view all the answers

Who is primarily responsible for developing the NISM-Series-XV: Research Analyst Certification Examination workbook?

A collaboration between the Certification Team, Mr. Manish Bansal, and the Examination Committee. Signup and view all the answers

What is the primary purpose of the certification for Research Analysts under SEBI (Research Analyst) Regulations, 2014?

To improve the quality of research reports and analysis provided by research analysts. Signup and view all the answers

According to the provided text, who is required to pass the NISM-Series-XV: Research Analyst Certification Examination?

All individuals registered as research analysts under SEBI regulations. Signup and view all the answers

What is a key aspect of the NISM-Series-XV: Research Analyst Certification Examination workbook that contributes to its effectiveness?

The emphasis on practical application of knowledge. Signup and view all the answers

What is a potential benefit of passing the NISM-Series-XV: Research Analyst Certification Examination for individuals?

Improved credibility and recognition as a research analyst. Signup and view all the answers

Which of the following is NOT mentioned as a topic covered in the NISM-Series-XV: Research Analyst Certification Examination workbook?

The use of technical analysis techniques for stock selection. Signup and view all the answers

Why is it essential for analysts to have clear and specific questions in mind while interacting with the management of a company?

To ensure efficient use of time Signup and view all the answers

What is the primary role of Research Analysts?

To collect data, interpret it, and convert it into recommendations for clients Signup and view all the answers

What should analysts avoid in their research reports?

Using abbreviations and jargon without explanation Signup and view all the answers

Why is it essential for Research Analysts to disclose conflicts of interest?

To appear transparent and unbiased Signup and view all the answers

What quality is expected of Research Analysts while performing their role?

Sincerity, honesty, and ethics Signup and view all the answers

Why is it recommended to use technology like recording devices while interviewing management and communicating with clients?

To ensure accuracy and transparency in communication Signup and view all the answers

What is the primary responsibility of Research Analysts while communicating with clients?

To suggest companies to clients based on facts and figures Signup and view all the answers

What skill set is required for the job of Research Analysts?

Both qualitative and quantitative skills Signup and view all the answers

What is the primary purpose of debentures/bonds/notes?

Raising long-term debt Signup and view all the answers

What is the characteristic of fully convertible debentures?

Fully convertible into ordinary shares Signup and view all the answers

What are foreign currency bonds?

Bonds issued in a currency different from the company's home currency Signup and view all the answers

Who are the investors in debentures/bonds/notes?

Both institutional and individual investors Signup and view all the answers

What is the regulator for debentures/bonds/notes in India?

Both RBI and SEBI Signup and view all the answers

What is the medium for issuing debentures/bonds/notes?

Both direct issuance by issuers and Stock Exchange Signup and view all the answers

What are partly convertible debentures (PCDs)?

Partly convertible into ordinary shares Signup and view all the answers

What are short-term debt instruments used for?

Raising debt for periods not exceeding one year Signup and view all the answers

What is one advantage for companies in emerging markets when issuing USD bonds?

They carry significantly lower interest rates. Signup and view all the answers

When an issuer issues a Masala bond, what type of currency risk do they face?

The investor bears the currency risk. Signup and view all the answers

What distinguishes an external bond from other types of bonds?

They are issued in a currency different from the country of issue. Signup and view all the answers

In what year were Masala bonds first issued?

2014 Signup and view all the answers

What happens if the foreign currency of a bond appreciates against the local currency?

The issuer needs to pay a higher amount in local currency. Signup and view all the answers

What is the primary function of a depository in the Indian securities market?

To hold securities in electronic form on behalf of investors Signup and view all the answers

What is a characteristic of both Masala bonds and external bonds?

They involve foreign currency risk for the issuer. Signup and view all the answers

Which of the following entities act as an intermediary between investors and depositories in the Indian securities market?

Depository Participants Signup and view all the answers

Which type of bonds are denominated in Indian Rupees but issued outside of India?

Masala bonds Signup and view all the answers

What is a potential disadvantage for issuers of USD bonds?

Obligation to repay in a stronger foreign currency. Signup and view all the answers

What is the primary function of a Depository Participant (DP) in the Indian securities market?

To enable investors to hold and transact in securities in dematerialized form Signup and view all the answers

Which of the following is NOT a service provided by depositories in the Indian securities market?

Providing trading platforms for securities Signup and view all the answers

Who maintains the company-level accounts of securities issued in the Indian securities market?

Depositories Signup and view all the answers

What is the primary purpose of Stock Exchanges in the Indian securities market?

To provide a platform for buying and selling already issued securities Signup and view all the answers

What role do clearing and settlement agencies play in the Indian securities market?

They manage the funds and securities settlement arising from trades. Signup and view all the answers

What is the primary difference between Depositories and Depository Participants?

Depositories hold securities electronically, while Depository Participants manage investor accounts. Signup and view all the answers

What do securities primarily allow investors to do with their savings?

Convert savings into financial assets that generate returns Signup and view all the answers

Which of the following best describes the main function of the securities market?

It creates liquidity by connecting buyers and sellers. Signup and view all the answers

How do securities serve the interests of both issuers and investors?

By allowing issuers to raise funds while providing investors the ability to sell their interests. Signup and view all the answers

Which of these is NOT considered a type of security?

Real Estate Properties Signup and view all the answers

What does the concept of dematerialization in securities refer to?

The transformation of physical assets into digital forms. Signup and view all the answers

What is the role of the securities market in facilitating capital movement?

It allows easy buying and selling of securities close to market prices. Signup and view all the answers

Which statement about securitization is true?

It involves creating financial instruments backed by existing assets. Signup and view all the answers

What advantage does the issuance of securities provide to borrowers?

Allows them to raise funds at a perceived cost. Signup and view all the answers

What is the purpose of the disclaimer in the publication?

To disclaim any responsibility for wrong moves or actions taken based on the information provided Signup and view all the answers

What is the nature of the statements and explanations provided in the publication?

General and not specific to any individual or organization Signup and view all the answers

What is the stance of NISM and SEBI regarding the accuracy of the information provided in the publication?

They do not warrant the totality and absolute accuracy of the information Signup and view all the answers

What should users of the publication do before acting on or following the steps suggested?

Seek professional advice Signup and view all the answers

Why do NISM and SEBI disclaim any liability for errors or omissions in the publication?

Because the publication is meant for general reading and educational purposes only Signup and view all the answers

What is the purpose of the publication, according to the disclaimer?

For general reading and educational purposes only Signup and view all the answers

What do the publishers of the publication offer to the readers/users of the information contained in the publication?

No guarantees or warranties of any kind Signup and view all the answers

Why do the publishers of the publication make best efforts to avoid errors?

To provide reliable information to the users Signup and view all the answers

Which of the following is a primary responsibility of a Research Analyst?

Providing investment advice to clients based on their risk tolerance and financial goals. Signup and view all the answers

What is the primary market used for by companies?

Raising fresh capital from investors Signup and view all the answers

What does an Initial Public Offering (IPO) involve?

A company issuing new shares for the first time to the public Signup and view all the answers

Which regulatory body defines the eligibility criteria for companies raising capital from the public in India?

Securities and Exchange Board of India (SEBI) Signup and view all the answers

What is the minimum percentage of shares that must be allocated to retail investors in an eligible issue according to SEBI regulations?

35% Signup and view all the answers

What is the maximum percentage of shares that can be allocated to qualified institutional investors in an eligible issue according to SEBI regulations?

50% Signup and view all the answers

What is the primary purpose of an IPO for a company?

To raise equity capital for future growth Signup and view all the answers

What is the main difference between a public issue and a private placement in the primary market?

Public issues involve offering securities to a wide range of investors, while private placements target a select group. Signup and view all the answers

What does SEBI's regulation regarding the proportion of shares allocated to different classes of shareholders aim to achieve?

Protect the interests of retail investors and ensure their participation. Signup and view all the answers

What type of debenture offers a complete conversion into ordinary shares of the issuing company?

Fully Convertible Debentures Signup and view all the answers

What is the main characteristic of short-term debt instruments like Treasury Bills, Commercial Papers, and Certificates of Deposit?

They mature in less than a year. Signup and view all the answers

Which of the following is NOT a characteristic of Foreign Currency Bonds?

Always issued in US dollars. Signup and view all the answers

Which of the following is a type of debenture that has a portion convertible into ordinary shares and a non-convertible portion that is repaid at maturity?

Partly Convertible Debentures (PCDs) Signup and view all the answers

What is the primary function of a regulator like RBI or SEBI in the context of debentures/bonds/notes?

To ensure the smooth functioning and compliance of the market. Signup and view all the answers

What is the primary difference between Non-Convertible Debentures (NCDs) and Fully Convertible Debentures?

NCDs are purely debt instruments, while Fully Convertible Debentures are ultimately converted into equity. Signup and view all the answers

In what way are debentures/bonds/notes similar to short-term debt instruments like Treasury Bills, Commercial Papers, and Certificates of Deposit?

They are all instruments used to raise debt. Signup and view all the answers

Which of the following is a key difference between Domestic and Foreign currency bonds?

Domestic bonds are traded in the local currency, while Foreign currency bonds are traded in a foreign currency. Signup and view all the answers

What is the primary function of securities markets as described in the text?

To facilitate the transfer of funds from savers to borrowers Signup and view all the answers

Which of the following is NOT considered a key component of the financial market, according to the text?

Government regulators Signup and view all the answers

What does the term 'securities' encompass, according to the definition provided in the Securities Contracts (Regulation) Act, 1956?

A broad range of financial instruments including shares, bonds, derivatives, and units of collective investment schemes Signup and view all the answers

Which of the following is NOT explicitly included in the definition of 'securities' as per the Securities Contracts (Regulation) Act, 1956?

Unit-linked insurance policies Signup and view all the answers

What is the primary role of regulatory bodies in the financial market?

To ensure the orderly development and growth of the market Signup and view all the answers

Which of the following is a key benefit of securities markets for investors?

Access to a wide range of investment options Signup and view all the answers

How do securities markets facilitate the conversion of savings into investments?

By channeling savings through intermediaries into investment opportunities Signup and view all the answers

Which of the following is NOT a characteristic of the securities market as described in the text?

It typically involves the trading of physical assets like gold and real estate Signup and view all the answers

What is the term used to describe depositary receipts when the issuing company delivers the securities and initiates the process?

Sponsored depositary receipts Signup and view all the answers

Where can unsponsored depositary receipts be traded?

In Over-The-Counter (OTC) markets Signup and view all the answers

What is the feature of depositary receipts that allows shares to be bought in the local market and converted into DRs?

Two-way fungibility Signup and view all the answers

What are Indian companies allowed to raise in the form of issue of ordinary equity shares through depository receipts?

Foreign currency resources Signup and view all the answers

What is the restriction on the conversion of IDRs into shares in India?

One year lock-in Signup and view all the answers

What are depositary receipts issued and traded in the USA called?

American Depositary Receipts Signup and view all the answers

Why are IDRs limited to resident Indian investors?

To promote domestic investment Signup and view all the answers

What is the purpose of SEBI guidelines for IDRs?

To regulate the issuance of IDRs Signup and view all the answers

What is the primary difference between Foreign Currency Convertible Bonds (FCCBs) and convertible bonds?

FCCBs are issued in foreign currency, while convertible bonds are issued in Indian Rupees Signup and view all the answers

What is the underlying asset on which the interest of Equity Linked Debentures (ELDs) is based?

Equity assets such as Nifty 50, S&P Sensex, or individual stocks Signup and view all the answers

What is the main characteristic of Commodity Linked Debentures (CLDs) similar to Equity Linked Debentures (ELDs)?

Both provide full capital protection Signup and view all the answers

What is the regulatory requirement for the issue of Foreign Currency Convertible Bonds (FCCBs)?

RBI notifications under FEMA Signup and view all the answers

What is the risk that investors still carry despite capital protection in Equity Linked Debentures (ELDs)?

Credit risk Signup and view all the answers

What is the underlying asset on which the interest of Commodity Linked Debentures (CLDs) is based?

Commodity assets like gold or silver Signup and view all the answers

What is the feature of Equity Linked Debentures (ELDs) that provides exposure to equity returns?

Investment in options Signup and view all the answers

What is the repayment obligation in Foreign Currency Convertible Bonds (FCCBs)?

In foreign currency Signup and view all the answers

What is the objective of issuing ESOPs?

To motivate employees to work in the interest of the company Signup and view all the answers

What is the primary function of the secondary market?

To promote the growth of the primary market and capital formation Signup and view all the answers

What is the main difference between OTC markets and Exchange Traded Markets?

OTC markets are traded and settled over the counter, while Exchange Traded Markets are traded through the stock exchange Signup and view all the answers

What is the role of the clearing corporation in the Exchange Traded Market?

To act as a counterparty and guarantee the settlement of trades Signup and view all the answers

What is trading?

A formal contract to buy/sell securities Signup and view all the answers

What is the feature of the electronic order-matching system in stock exchanges in India?

It facilitates efficient and speedy execution of trades Signup and view all the answers

What is the benefit of an active secondary market?

It promotes the growth of the primary market and capital formation Signup and view all the answers

What happens when an employee chooses to exercise the option in an ESOP?

The company will have to issue new shares Signup and view all the answers

Which of the following is a characteristic that makes precious metals, like gold and silver, suitable investment options?

Their storage costs are relatively low compared to their value. Signup and view all the answers

What is a key difference between hard commodities and soft commodities?

Hard commodities are natural resources that are mined or extracted, while soft commodities are agricultural products. Signup and view all the answers

What is a primary advantage of investing in commodity ETFs compared to directly investing in physical commodities?

Commodity ETFs eliminate the need for investors to handle storage obligations. Signup and view all the answers

Why are commodities considered a potential hedge against inflation?

Commodity prices tend to rise during inflationary periods, preserving the real value of investments. Signup and view all the answers

Which of the following is a potential drawback of investing in commodities?

Commodities are subject to significant price fluctuations and volatility. Signup and view all the answers

What is a key characteristic that distinguishes commodities from other types of assets?

Commodities are standardized and interchangeable, while other assets are often unique. Signup and view all the answers

Which of the following is an example of a soft commodity?

Wheat Signup and view all the answers

How do commodity ETFs typically track the performance of the underlying commodities?

By investing in derivatives, such as futures contracts, that track the prices of those commodities. Signup and view all the answers

What is a primary function served by a rights issue?

To increase shareholder equity by issuing new shares Signup and view all the answers

Which of the following is a characteristic of a stock split?

Lower the price per share while maintaining market capitalization Signup and view all the answers

What is the primary purpose of a merger and acquisition?

To consolidate market competition and expand market share Signup and view all the answers

What does the objective of a buyback of shares typically aim to achieve?

To improve the financial ratios by reducing outstanding shares Signup and view all the answers

What is a significant feature of a demerger?

The creation of a new company from an existing business Signup and view all the answers

In valuation principles, what does the concept of 'market risk (beta)' measure?

The systematic risk compared to the market as a whole Signup and view all the answers

Which valuation approach focuses on estimating intrinsic value using projected cash flows?

Discounted cash flow model Signup and view all the answers

What aspect of investments does the concept of 'margin of safety' relate to?

The allowance for error in valuation estimates Signup and view all the answers

What is a primary challenge associated with measuring risk in investments?

Quantifying future returns accurately Signup and view all the answers

What is a key quality of a good research report?

Clarity and conciseness of information Signup and view all the answers

What is the primary purpose of an Exchange Traded Fund (ETF)?

To provide diversification benefits of an index fund Signup and view all the answers

How are the units of an Exchange Traded Fund (ETF) traded?

On a stock exchange in demat form Signup and view all the answers

What is a characteristic of preference shares?

They offer a pre-determined rate of dividend Signup and view all the answers

Why do preference shares resemble equity?

Because preference shareholders are called shareholders of the company Signup and view all the answers

What is the primary role of a Research Analyst?

To help clients take investment decisions Signup and view all the answers

What is the process similar to that of a Research Analyst when buying a new phone?

Comparing features and technical specifications Signup and view all the answers

What is a key benefit of Exchange Traded Funds (ETFs)?

They provide the diversification benefits of an index fund Signup and view all the answers

What regulates Exchange Traded Funds (ETFs) in India?

SEBI Signup and view all the answers

What is the analysis stage of a Research Analyst's work involved with?

Processing data to take decisions Signup and view all the answers

How are Exchange Traded Funds (ETFs) issued?

Through direct issuance by mutual funds and Stock Exchange Signup and view all the answers

What quality is desired in a Research Analyst?

All of the above Signup and view all the answers

What is the primary difference between an Exchange Traded Fund (ETF) and an index fund?

ETFs are traded on a stock exchange Signup and view all the answers

What is the primary responsibility of a Research Analyst?

To interact with companies and clients Signup and view all the answers

What is the role of a Research Analyst similar to when evaluating options for a new phone?

All of the above Signup and view all the answers

What is the importance of interaction with companies and clients in a Research Analyst's role?

To understand clients' needs and provide recommendations Signup and view all the answers

What is the process of a Research Analyst involved with?

Research and analysis Signup and view all the answers

Who is responsible for appointing Depository Participants?

The depository Signup and view all the answers

Which of the following can be registered as a Depository Participant?

All of the above Signup and view all the answers

What is the primary role of a Trading Member?

To facilitate buy and sell transactions for investors Signup and view all the answers

What is an Authorised Person?

A representative appointed by a stock broker to reach out to investors Signup and view all the answers

What happened to sub-brokers with effect from April 01, 2019?

They were prohibited from operating Signup and view all the answers

What is the primary purpose of the approval process for Authorised Persons?

All of the above Signup and view all the answers

What is the role of SEBI in the context of Depository Participants and Trading Members?

All of the above Signup and view all the answers

What is the key difference between a sub-broker and an Authorised Person?

Sub-brokers can operate independently, while Authorised Persons must be appointed by a stock broker. Signup and view all the answers

What is the main purpose of underwriters in the primary market?

To ensure the success of a public offering by guaranteeing the sale of securities. Signup and view all the answers

What is the difference between hard underwriting and soft underwriting?

Hard underwriting involves a commitment at the initial stage, while soft underwriting occurs after pricing is determined. Signup and view all the answers

Which of the following is NOT a type of Institutional Investor?

Retail Investors Signup and view all the answers

What is the role of Foreign Portfolio Investors (FPIs) in the Indian securities market?

To invest in Indian securities, contributing to the market's liquidity and growth. Signup and view all the answers

Which of the following is a key function of an underwriter in an IPO?

Guaranteeing the sale of securities to investors. Signup and view all the answers

What is the main purpose of a credit rating agency in the context of an IPO?

To assess the issuer's financial health and creditworthiness. Signup and view all the answers

What is the main difference between retail investors and institutional investors?

Retail investors are individuals, while institutional investors are large organizations. Signup and view all the answers

What does the term "hard underwriting" refer to in the context of an IPO?

An underwriter's commitment to purchase securities at the initial stage, before pricing is finalized. Signup and view all the answers

What is the total number of marks available in the examination?

100 Signup and view all the answers

What is the passing score required to pass the examination?

60 marks Signup and view all the answers

How many multiple choice questions are included in the examination?

92 Signup and view all the answers

Which software should candidates be proficient in for numerical computations during the examination?

Microsoft Excel or OpenOffice Calc Signup and view all the answers

What percentage of marks is deducted for each wrong answer in the examination?

25% Signup and view all the answers

How many case-based questions does the examination include?

2 Signup and view all the answers

What is a key focus area of the examination in relation to research?

Both qualitative and quantitative dimensions Signup and view all the answers

What is one of the fundamental topics candidates should understand for the examination?

Risk and return principles Signup and view all the answers

What is the role of a Research Analyst?

RAs help their clients make informed decisions. Signup and view all the answers

Which of the following factors significantly affect analysis and decision-making for Research Analysts?

All of the above Signup and view all the answers

What is NOT a key quality desired in a good research analyst?

Strong negotiating skills Signup and view all the answers

Which of the following is a key skill required for a Research Analyst to effectively analyze financial data?

Proficiency in data visualization tools Signup and view all the answers

What type of data do Research Analysts primarily analyze to assess a company's financial health?

Financial statements and reports Signup and view all the answers

Which of these skills is NOT a crucial aspect of effective communication for a Research Analyst?

Ability to negotiate with clients Signup and view all the answers

What is a key benefit of using spreadsheets and data analytical tools for Research Analysts?

Streamlining data collection and analysis Signup and view all the answers

What is the primary objective of a Research Analyst when evaluating an industry or company?

Providing investment recommendations Signup and view all the answers

What is the main function of a Depository Participant (DP) in the securities market?

They act as intermediaries between investors and depositories. Signup and view all the answers

Which of the following is NOT a depository service provided by institutions like CDSL and NSDL?

Providing investment advice to investors. Signup and view all the answers

What is the primary purpose of stock exchanges like NSE, BSE, and MSEI?

To provide a platform for buying and selling securities. Signup and view all the answers

Which of the following statements is TRUE regarding MTM margin?

It is the notional loss incurred on an outstanding trade due to price movements. Signup and view all the answers

Who manages the funds and securities settlement resulting from trades on stock exchanges?

Clearing and settlement agencies. Signup and view all the answers

Which of the following entities is responsible for maintaining company-level accounts of securities issued?

Depositories like CDSL and NSDL Signup and view all the answers

What is the significance of anonymous order matching on stock exchanges?

It allows investors to trade without revealing their trading strategies. Signup and view all the answers

How are securities held by investors through a Depository Participant (DP)?

Electronically, in a dematerialized form. Signup and view all the answers

Which approach involves analyzing the overall economic conditions before focusing on specific companies?

Top down approach Signup and view all the answers

What is a fundamental principle of risk and return in financial analysis?

Higher risk is associated with the potential for higher returns Signup and view all the answers

Which component is essential in writing a good research report?

Detailed financial data analysis Signup and view all the answers

What is one of the key drivers used in company analysis?

Historical financial statements Signup and view all the answers

Which of the following is NOT a regulatory framework governing research analysts in India?

Insurance Regulatory and Development Authority Act Signup and view all the answers

What does the fundamental analysis of a company include?

Analyzing both quantitative and qualitative dimensions Signup and view all the answers

In what context is the term 'corporate actions' significant?

Decisions by a company that impact its stakeholders Signup and view all the answers

Which of the following best describes 'valuation principles' in financial analysis?

Assessing the worth of a company based on various financial metrics Signup and view all the answers

What is the primary advantage of Commodity Linked Debentures (CLDs) for investors?

Potential for capital appreciation and income from commodity markets while protecting initial capital. Signup and view all the answers

What is the key characteristic that makes Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS) distinct from other debt instruments?

They are based on receivables and cash flows from financial assets. Signup and view all the answers

How do REITs (Real Estate Investment Trusts) ensure they meet regulatory requirements for tax benefits?

Investing at least 80% of their assets in revenue-generating real estate projects. Signup and view all the answers

Which of the following is a key difference between REITs and InvITs?

REITs invest in real estate projects while InvITs invest in infrastructure projects. Signup and view all the answers

What is the primary function of cash flows generated from financial assets in the context of MBS and ABS?

To cover interest and principal repayment obligations on the bonds issued. Signup and view all the answers

What is a common characteristic of commodities that distinguishes them from other types of assets?

They are largely homogenous in nature. Signup and view all the answers

What is the main purpose of creating liquidity in otherwise illiquid assets through securitization, as exemplified by MBS and ABS?

To make these assets more accessible to a wider range of investors. Signup and view all the answers

Which of the following is a key benefit of investing in REITs and InvITs for investors?

Tax benefits and potential for regular income distribution. Signup and view all the answers

What is the primary reason why both REITs and InvITs are required to distribute at least 90% of their distributable surplus cash flow to unit holders?

To provide regular income to investors. Signup and view all the answers

Which of the following entities are NOT eligible to be registered as a Depository Participant (DP)?

Insurance companies Signup and view all the answers

What is the primary role of a Trading Member in the stock market?

To facilitate buying and selling transactions for investors Signup and view all the answers

What is the purpose of an Authorised Person in the stock market?

To act as an agent for a stock broker in reaching out to investors Signup and view all the answers

What was the SEBI Board's decision regarding sub-brokers in 2018?

To eliminate the role of sub-brokers as intermediaries Signup and view all the answers

Which of the following is NOT a requirement for a sub-broker to become an Authorised Person (AP) or Trading Member?

Providing a guarantee to the stock exchange Signup and view all the answers

What is the primary role of SEBI in the context of Depository Participants (DPs)?

To register and regulate DPs Signup and view all the answers

Which of the following entities is most likely to be classified as a 'Trading Member' under the stock market regulations?

A brokerage firm that executes buy and sell orders for clients on a stock exchange Signup and view all the answers

Which of the following is a key difference between an Authorised Person (AP) and a sub-broker?

APs are subject to stricter regulatory oversight than sub-brokers Signup and view all the answers

What is the main purpose of stock market indices?

To provide a comparison of returns on investments in stock markets with other asset classes Signup and view all the answers

What is the regulator of mutual funds in India?

SEBI Signup and view all the answers

What is the key difference between open-ended and closed-ended mutual fund schemes?

Closed-ended schemes have a fixed unit capital Signup and view all the answers

What do indices for banking, information technology, and pharma belong to?

Sector indices Signup and view all the answers

What is the Net Asset Value (NAV) of a mutual fund?

The value of the portfolio held by the fund Signup and view all the answers

What is a key use of stock market indices?

To act as an underlying for index funds Signup and view all the answers

Which of the following indices is designed to track mid-cap stocks in India?

S&P BSE MidCap Signup and view all the answers

What do mutual funds pool together?

Money contributed by investors Signup and view all the answers

Which of the following is a type of depositary receipt traded in the Indian stock market?

Indian Depositary Receipts (IDRs) Signup and view all the answers

What is the primary reason for companies to issue depository receipts?

To gain access to a wider investor base. Signup and view all the answers

Which of the following is NOT a characteristic of holding depository receipts?

Right to vote on company matters. Signup and view all the answers

What is the main difference between ADRs and IDRs?

ADRs are traded in the US, while IDRs are traded in India. Signup and view all the answers

Which of the following is a benefit for investors who hold depository receipts?

They can invest in foreign stocks through their local brokers and currency. Signup and view all the answers

What is the primary purpose of Foreign Currency Convertible Bonds (FCCBs)?

To raise capital in foreign currency. Signup and view all the answers

Where are GDRs typically issued and traded?

In the European Union member states. Signup and view all the answers

What is a key advantage of issuing GDRs for companies?

They can access a larger pool of investors. Signup and view all the answers

What is the main difference between initial margin and MTM margin?

Initial margin is a percentage of transaction value, while MTM margin is the notional loss on a trade. Signup and view all the answers

What is the primary role of a stock exchange in the securities market?

To provide a platform for buying and selling securities. Signup and view all the answers

Which of the following is NOT a service provided by a depository?

Providing trading platforms for securities. Signup and view all the answers

What is the primary role of a depository participant (DP)?

To act as an intermediary between investors and depositories. Signup and view all the answers

Which of the following is NOT a depository currently registered with SEBI in India?

Bombay Stock Exchange (BSE) Signup and view all the answers

What is the main difference between investor-level accounts and company-level accounts of securities?

Investor-level accounts are maintained by the depository participant, while company-level accounts are maintained by the depository. Signup and view all the answers

What is the primary benefit of holding securities in dematerialized form?

All of the above. Signup and view all the answers

Which of the following statements about market intermediaries is TRUE?

Market intermediaries facilitate the flow of funds and securities between buyers and sellers. Signup and view all the answers

What implication does the disclaimer state regarding the views expressed in the publication?

They do not constitute guidance for individual investment needs. Signup and view all the answers

What should a user consider before following any steps suggested in the publication?

Seeking professional advice. Signup and view all the answers

What responsibility does NISM and SEBI disclaim in relation to the publication's content?

Providing complete and absolute accuracy of information. Signup and view all the answers

Which of the following is NOT stated as a purpose of the publication?

To serve as a guide for investment. Signup and view all the answers

What type of information does the publication contain regarding its sources?

Information obtained from sources believed to be reliable. Signup and view all the answers

What is the general nature of the content provided in the publication?

General statements and opinions. Signup and view all the answers

What must individuals consider about their circumstances when using information from this publication?

Their specific investment needs and objectives. Signup and view all the answers

What type of liability do NISM and SEBI claim regarding the errors in the publication?

No liability for errors or omissions. Signup and view all the answers

What is one advantage to the issuer of convertible debentures?

They have a lower coupon rate compared to pure debt instruments. Signup and view all the answers

What happens to existing shareholders when new shares are issued due to the conversion of debentures?

Their stakes are diluted. Signup and view all the answers

In which phase do investors in convertible debentures initially earn coupon income?

When the company’s project is in its nascent stage. Signup and view all the answers

What are depository receipts (DRs)?

Financial instruments representing shares of a foreign company. Signup and view all the answers

What is the primary purpose of issuing a depositary receipt?

To simplify the investment process in local markets. Signup and view all the answers

Which statement best describes a unique feature of depositary receipts?

They represent equity shares held in custody by a bank. Signup and view all the answers

What is a potential disadvantage for investors when shares are converted from convertible debentures?

Dilution of their ownership percentage. Signup and view all the answers

What is the role of the bank when issuing depositary receipts?

To hold equity shares in custody and issue certificates. Signup and view all the answers

What is the primary role of a Research Analyst?

To interact with companies/clients to understand their business and operations Signup and view all the answers

What is the main purpose of technical analysis in investment research?

To predict price movements based on historical data Signup and view all the answers

What is fundamental analysis used for in investment research?

To analyze a company's financial performance and prospects Signup and view all the answers

What is the role of economic analysis in investment research?

To analyze macroeconomic trends and their impact on the market Signup and view all the answers

What is industry analysis used for in investment research?

To understand the industry trends and outlook Signup and view all the answers

What is the purpose of company analysis in investment research?

To analyze a company's business and financial performance Signup and view all the answers

What is the significance of understanding the business model of a company?

To understand the company's competitive advantages Signup and view all the answers

What is the purpose of analyzing a company's governance structure?

To analyze the company's management quality Signup and view all the answers

What is the significance of SWOT analysis in company analysis?

To identify the company's strengths, weaknesses, opportunities, and threats Signup and view all the answers

What is the purpose of financial analysis in company analysis?

To evaluate the company's financial performance and position Signup and view all the answers

What distinguishes a preferential issue from a public issue?

A preferential issue offers securities to select individuals or groups. Signup and view all the answers

Which of the following is a requirement for issuing bonus shares?

The company must have sufficient retained earnings. Signup and view all the answers

What are investors entitled to when rights shares are offered?

Investors can choose to exercise, transfer, or let their rights lapse. Signup and view all the answers

Which option accurately describes a private placement of securities?

A placement that can be listed on a stock exchange if it meets requirements. Signup and view all the answers

What must a company do when it issues bonus shares?

Transfer an equivalent amount from retained earnings to share capital. Signup and view all the answers

What does SEBI's regulation concerning pricing in a preferential issue ensure?

Pricing must be equal to the market value at the time of issuance. Signup and view all the answers

Which aspect is NOT part of the SEBI requirements for a preferential issue?

A mandatory public offering to all shareholders. Signup and view all the answers

What is a common misconception regarding the transfer of rights shares?

Rights shares can be transferred to another investor or allowed to lapse. Signup and view all the answers

What are securities primarily used for in the financial market?

To show evidence of ownership or indebtedness Signup and view all the answers

How do securities markets enhance liquidity for investors?

By bringing a large number of buyers and sellers together Signup and view all the answers

What allows investors to convert savings into financial assets?

Security ownership Signup and view all the answers

What is one of the primary functions of the securities market?

To allow issuers to gather funds for long-term projects Signup and view all the answers

Which of the following best describes the relationship between issuers and investors in the securities market?

Their objectives are complementary. Signup and view all the answers

What is one effect of dematerialization of securities?

It simplifies the trading process. Signup and view all the answers

Which type of securities represents ownership in a company?

Equity shares Signup and view all the answers

What is a major benefit of issuing securities for organizations?

It provides a method to raise capital at a lower cost. Signup and view all the answers

What distinguishes buy-side analysts from sell-side analysts in investment firms?

Buy-side analysts work for firms managing investments on behalf of clients. Signup and view all the answers

What is a key characteristic of the research reports produced by buy-side analysts?

They contain recommendations for securities to buy, hold, or sell. Signup and view all the answers

What is the primary function of independent research analysts?

To provide customized research reports on demand for clients. Signup and view all the answers

Who are the typical clients of independent research analysts?

Various entities including institutions and fund managers. Signup and view all the answers

Which of the following is NOT a function of research reports generated by analysts?

Generate reports exclusively for public consumption. Signup and view all the answers

What is one way independent research analysts generate revenue?

By selling research on a subscription basis. Signup and view all the answers

Which type of analyst primarily focuses on generating investment recommendations for their organization's internal use?

Buy-side analysts. Signup and view all the answers

What type of firms do independent research analysts typically work for?

Boutique research firms. Signup and view all the answers

What is the main function of underwriters in the primary market?

To guarantee the subscription of any unsold portion of a public offer. Signup and view all the answers

What differentiates hard underwriting from soft underwriting?

Soft underwriting allows underwriters to exit commitments under certain events. Signup and view all the answers

Which type of investor is categorized under Institutional Investors?

Large entities such as banks and insurance companies. Signup and view all the answers

Foreign Portfolio Investors (FPIs) are defined as:

Entities established outside India making investments in domestic companies. Signup and view all the answers

How do underwriters manage risk when they commit to securities issues?

By placing devolved shares primarily with financial institutions. Signup and view all the answers

The role of intermediaries during the issue process involves what key activity?

Coordination between issuers and various intermediaries. Signup and view all the answers

Which characteristic is NOT true about Soft Underwriting?

It usually results in higher risk for the underwriter. Signup and view all the answers

What is a common feature of Institutional Investors?

They have the capacity to manage large pools of funds. Signup and view all the answers

What is a key characteristic of commodities?

They are goods that are meant for use in production or for consumption Signup and view all the answers

Why are precious metals considered a viable investment option?

Because they have a very long life and low storage cost Signup and view all the answers

What is Commodity ETF?

An exchange-traded fund that invests in a range of physical commodities Signup and view all the answers

What makes hard commodities different from soft commodities?

Hard commodities are mined or extracted, while soft commodities are grown Signup and view all the answers

Why is investing in commodities considered a way to protect the real value of investment?

Because commodity prices are directly related to inflation Signup and view all the answers

What is the benefit of investing in Commodity ETF?

The fund handles the storage of commodities Signup and view all the answers

What is a common characteristic of precious metals?

They have very long life Signup and view all the answers

What is the main difference between hard commodities and soft commodities?

Hard commodities are mined or extracted, while soft commodities are grown Signup and view all the answers

What is the primary role of a Research Analyst?

To provide investment recommendations based on analysis Signup and view all the answers

Which of the following is NOT a desirable quality in a Research Analyst?

Lack of attention to detail Signup and view all the answers

What is a key responsibility of a Research Analyst in terms of financial statements?

Reading and comprehending financial statements Signup and view all the answers

Which of the following is NOT a typical source of information for Research Analysts?

Social media trends Signup and view all the answers

Which of the following is a key skill that enables a Research Analyst to identify trends and interrelationships in financial data?

Comfort in working with numbers and data analysis tools Signup and view all the answers

Which of the following describes the role of a Sell-Side Analyst?

They analyze companies and issue recommendations to institutional investors. Signup and view all the answers

What is a key factor that influences analysis and decision-making for a Research Analyst?

Efficiency of operations and financial performance Signup and view all the answers

What is the primary goal of a Research Analyst's work?

To provide clients with informed investment decisions Signup and view all the answers

What is the primary focus area for research analysts when evaluating the economy?

Changes in macro-economic factors Signup and view all the answers

Which of the following is a responsibility of research analysts in understanding industries?

Analyzing competition and operating factors Signup and view all the answers

Which aspect is NOT explicitly a focus area for research analysts studying companies?

Performance of individual employees Signup and view all the answers

What key economic factor can analysts assess to understand investment patterns?

National income and inflation rates Signup and view all the answers

Which of the following areas is considered when analysts evaluate foreign investment impacts?

Foreign Direct Investment (FDI) and Foreign Portfolio Investors (FPIs) Signup and view all the answers

What do research analysts need to consider about industries that can affect growth?

The regulatory environment and business models Signup and view all the answers

In analyzing companies, what aspect do research analysts examine that is linked to consumer behavior?

Sensitivity of demand to price changes Signup and view all the answers

Which of the following is NOT part of the focus areas for research analysts when evaluating macro-economic factors?

Corporate tax strategies Signup and view all the answers

What is the payment currency for interest and repayment on Foreign Currency Convertible Bonds (FCCBs)?

Foreign Currency Signup and view all the answers

Which of the following best describes the investment strategy of Equity Linked Debentures (ELDs)?

Invest in fixed income and options to link returns to equity Signup and view all the answers

What type of risk is still associated with Equity Linked Debentures despite capital protection?

Credit risk Signup and view all the answers

What underlying assets do Commodity Linked Debentures (CLDs) primarily link their returns to?

Precious metals like Gold and Silver Signup and view all the answers

How are the returns on Equity Linked Debentures (ELDs) designed to be earned?

Via the performance of the underlying equity asset Signup and view all the answers

What regulation governs Foreign Currency Convertible Bonds (FCCBs) in India?

Foreign Exchange Management Act (FEMA) Signup and view all the answers

What is the nature of interest rates on Commodity Linked Debentures (CLDs)?

Float based on commodity market performance Signup and view all the answers

What does the term 'equity participation' imply in the context of Equity Linked Debentures (ELDs)?

Investors can benefit from stock price appreciation Signup and view all the answers

What is the main characteristic of an offshore offering?

It involves raising capital from investors outside the country. Signup and view all the answers

What distinguishes an Offer for Sale (OFS) from other share offerings?

It involves existing shareholders selling their allocated shares. Signup and view all the answers

What is the purpose of issuing sweat equity?

To motivate employees and stakeholders for their contributions. Signup and view all the answers

Under the Employee Stock Option Scheme (ESOPs), when can employees buy the shares?

At a determined price after a vesting period. Signup and view all the answers

How does an Offer for Sale (OFS) impact the company's share capital?

It has no effect on the share capital of the company. Signup and view all the answers

Which of the following describes a key feature of sweat equity?

It rewards participants for their contributions without a capital raise objective. Signup and view all the answers

What typically follows the vesting period in Employee Stock Option Schemes (ESOPs)?

An option for employees to buy shares at a pre-determined price. Signup and view all the answers

Which of the following is a notable example of an Offer for Sale (OFS)?

A government divestment of shares in Public Sector Undertakings. Signup and view all the answers

What is a characteristic that distinguishes a commodity from a non-commodity?

It is interchangeable with other goods of the same type Signup and view all the answers

What is the main advantage of investing in precious metals like gold and silver?

They preserve real value of money and have low storage costs Signup and view all the answers

What is a Commodity ETF?

An exchange-traded fund that invests in a range of physical commodities Signup and view all the answers

What is the main difference between hard and soft commodities?

Hard commodities are natural resources, while soft commodities are grown Signup and view all the answers

Why do commodities involve huge storage costs?

Because they are bulky and difficult to store Signup and view all the answers

What is the advantage of investing in commodity ETFs?

The investor can invest in a range of physical commodities without storage obligations Signup and view all the answers

Why are precious metals like gold and silver a viable investment option?

Because they have low storage costs and can preserve real value of money Signup and view all the answers

What is the relationship between inflation and commodity prices?

Commodity prices are directly related to inflation Signup and view all the answers

Which of the following is a primary responsibility of a Research Analyst?

All of the above Signup and view all the answers

Which of the following is NOT a primary responsibility of a Research Analyst?

Managing investment portfolios. Signup and view all the answers

Which of the following is a key principle for Research Analysts when interacting with companies?

Maintaining objectivity and independence in their analysis. Signup and view all the answers

Which of the following is NOT a desirable quality for a Research Analyst?

A willingness to take excessive risks for high returns. Signup and view all the answers

What is the primary role of a Research Analyst in the context of investment decisions?

To provide information and analysis to help clients make informed decisions. Signup and view all the answers

Which of the following best describes the process of research and analysis performed by Research Analysts?

Gathering data from various sources and then interpreting the data to identify trends and opportunities. Signup and view all the answers

Which of the following is an example of a common principle for Research Analysts when interacting with companies?

Maintaining a professional and ethical approach in all interactions. Signup and view all the answers

Which of the following is a key quality that is desired in a Research Analyst?

A commitment to continuous learning and development. Signup and view all the answers

What is a key aspect of a Research Analyst's role in interacting with companies and clients?

Maintaining a neutral stance to avoid bias in research. Signup and view all the answers

Which of the following is NOT a primary responsibility of a Research Analyst?

Managing investment portfolios for clients. Signup and view all the answers

Which of the following is NOT a crucial quality for a Research Analyst?

Extensive experience in trading and brokerage. Signup and view all the answers

What is a key difference between a warrant and a convertible warrant?

Warrants provide the right to purchase shares, while convertible warrants allow the holder to convert debt into equity. Signup and view all the answers

What is the role of technical analysis in fundamental research?

Technical analysis complements fundamental analysis by providing insights into market sentiment and momentum. Signup and view all the answers

Which of the following is NOT a key macroeconomic variable used in economic analysis?

Inventory Turnover Ratio Signup and view all the answers

Which of the following is NOT a source of information for industry analysis?

Personal investment strategies of market analysts. Signup and view all the answers

What is a key aspect of understanding industry cyclicality?

Identifying the industry's sensitivity to economic fluctuations. Signup and view all the answers

What is a significant factor in assessing the quality of management and governance structure of a company?

The company's ethical practices and corporate social responsibility. Signup and view all the answers

What is a primary source of information for company analysis - Financial Analysis?

Financial statements and regulatory filings. Signup and view all the answers

What is the role of anchor investors in a public issue?

They can be allocated up to 60% of the QIB portion. Signup and view all the answers

Which of the following is a requirement for an FPO?

It may include both fresh issues and offers for sale. Signup and view all the answers

What does a private placement involve?

Issuing securities to a limited number of investors. Signup and view all the answers

What is the passing score required to pass the examination?

60 marks Signup and view all the answers

What is the primary characteristic of Qualified Institutional Placements (QIPs)?

They involve placing shares with qualified institutional buyers. Signup and view all the answers

How many multiple choice questions are included in the examination?

92 questions Signup and view all the answers

Which of the following statements about the allocation price for anchor investors is true?

It can be lower than the final issue price determined through book building. Signup and view all the answers

What is one regulatory reason for a company to conduct a follow-on public offer (FPO)?

To increase public shareholding to meet regulatory requirements. Signup and view all the answers

What is the penalty for each incorrect answer in the examination?

25% of the marks Signup and view all the answers

Which approach focuses on analyzing the broad market trends before diving into specific securities?

Top-down approach Signup and view all the answers

Which category of investors does not qualify as a Qualified Institutional Buyer (QIB)?

Individual retail investors Signup and view all the answers

What is a vital component of both microeconomic and macroeconomic analysis in assessing companies?

Macroeconomic variables Signup and view all the answers

What is the maximum number of investors allowed under private placement as per the Companies Act 2013?

Fifty Signup and view all the answers

Which element is essential for a well-structured research report?

Comprehensive data and analysis Signup and view all the answers

What is the total duration allowed to complete the examination?

2 hours Signup and view all the answers

What is a key principle involved in understanding risk and return?

Higher risk can lead to higher potential returns Signup and view all the answers

What is the primary role of the Clearing Corporation in the context of exchange-traded securities?

To facilitate the settlement of trades and reduce counterparty risk. Signup and view all the answers

How does the Clearing Corporation manage the risk of default by buyers and sellers?

By charging various margins, including initial margin, peak margin, and mark-to-market (MTM) margins. Signup and view all the answers

Which of the following statements is TRUE regarding the settlement of over-the-counter (OTC) transactions?

OTC transactions are settled directly between the counterparties. Signup and view all the answers

What is the primary benefit of the Clearing Corporation's role in providing full novation of contracts between buyers and sellers?

It significantly reduces counterparty risk for investors. Signup and view all the answers

Which of the following is NOT a type of margin charged by the Clearing Corporation to manage default risk?

Settlement margin Signup and view all the answers

What is the main difference between the settlement of exchange-traded securities and OTC transactions?

Exchange-traded securities are settled through a clearing corporation, while OTC transactions are settled directly between counterparties. Signup and view all the answers

What is the purpose of the Clearing Corporation providing an obligation report to brokers and custodians?

To inform brokers and custodians of their outstanding obligations for settlement. Signup and view all the answers

Why does the Clearing Corporation charge mark-to-market (MTM) margins?

To provide a financial cushion in case of market fluctuations. Signup and view all the answers

What is a major aim of NISM's certification programs?

To enhance the quality and standards of professionals in the financial services sector Signup and view all the answers

What type of educational activities does NISM primarily engage in?

Capacity building among stakeholders in securities markets Signup and view all the answers

Which of the following statements best describes NISM?

An organization that provides professional education, certifications, training, and research in financial markets Signup and view all the answers

Which aspect is NOT a focus area of NISM?

Providing consumer credit counseling Signup and view all the answers

What distinguishes the workbook version dated May 2023 for NISM Certification Examination?

It is aimed at candidates appearing for the exam after June 30, 2023 Signup and view all the answers

What is one of the primary goals of NISM in terms of stakeholder engagement?

Capacity building among various stakeholders in the securities markets Signup and view all the answers

What does NISM primarily focus on in its educational programs?

Training for diverse segments of the financial services sector Signup and view all the answers

Which of the following best describes the nature of the publication by NISM?

A certification preparatory workbook for Research Analyst students Signup and view all the answers

What is the main objective of issuing Employee Stock Ownership Plans (ESOPs)?

To motivate employees to work in the interest of the company Signup and view all the answers

What is a key characteristic of the secondary market?

It provides liquidity to already issued securities Signup and view all the answers

Which market allows for direct negotiations between counterparties?

Over-The-Counter Market Signup and view all the answers

What is the main function of stock exchanges in the context of trading?

To facilitate the execution and settlement of trades Signup and view all the answers

What role does a clearing corporation play in exchange-traded markets?

It guarantees the settlement of trades between buyers and sellers Signup and view all the answers

Which best describes how trading is conducted in an electronic order-matching system?

It allows automated execution of trades based on predetermined criteria Signup and view all the answers

How does an active secondary market impact the primary market?

It provides a potential exit option for primary market investors Signup and view all the answers

Which of the following statements correctly describes the primary market?

It facilitates direct transactions between the issuer and investors Signup and view all the answers

What is an onshore offering?

Capital raised exclusively in the domestic market. Signup and view all the answers

What characterizes an Offer for Sale (OFS)?

It allows existing shareholders to sell their shares. Signup and view all the answers

What is the primary purpose of issuing sweat equity?

To enhance employee motivation and management loyalty. Signup and view all the answers

How does an Employee Stock Option Scheme (ESOP) typically benefit employees?

By allowing employees to buy shares at a future price. Signup and view all the answers

Which of the following is true about OFS transactions?

They do not involve any new capital inflow for the company. Signup and view all the answers

What is a key characteristic of sweat equity shares?

They reward contributions without an immediate cash transaction. Signup and view all the answers

What factors determine the vesting period for ESOPs?

Internal policies of the company and employee performance. Signup and view all the answers

Who are the typical recipients of sweat equity shares?

Employees, promoters, and technocrats contributing significantly. Signup and view all the answers

Who can be registered as a Depository Participant (DP)?

Public financial institutions and approved foreign banks Signup and view all the answers

What distinguishes Trading Members from Authorised Persons?

Trading Members are directly registered with stock exchanges Signup and view all the answers

What action did SEBI take regarding sub-brokers in 2018?

Sub-brokers were to cease existing as an intermediary Signup and view all the answers

What is a primary requirement for a person to become an Authorized Person?

Specific prior approval from the stock exchange Signup and view all the answers

What entity appoints the Depository Participants?

Securities Exchange Board of India (SEBI) Signup and view all the answers

Which of the following best defines the role of Trading Members?

They facilitate trading transactions on stock exchanges Signup and view all the answers

In what scenario can existing sub-brokers continue their services?

If they fulfill the eligibility criteria as Authorized Persons or Trading Members Signup and view all the answers

Which of the following statements is true about the categorization of Stock Brokers?

Stock Brokers can be individuals or corporate bodies Signup and view all the answers

What is the main purpose of corporate actions?

To alter the capital structure Signup and view all the answers

What is the concept of value in a business based on?

Earnings and assets Signup and view all the answers

What is the approach to valuation that involves estimating the present value of future cash flows?

Discounted cash flow model Signup and view all the answers

What is the concept that measures the sensitivity of an investment's return to changes in the overall market?

Beta Signup and view all the answers

What is the primary purpose of a research report?

To provide investment recommendations Signup and view all the answers

What is the regulatory infrastructure in financial markets responsible for?

All of the above Signup and view all the answers

What is the concept of return on investment (ROI) based on?

Gain from investment divided by cost Signup and view all the answers

What is the purpose of a stock split?

To reduce the market price of shares Signup and view all the answers

What is the term for the process of buying back shares by a company?

Buyback of shares Signup and view all the answers

What is the purpose of regulatory bodies in the financial market?

All of the above Signup and view all the answers

What is meant by qualitative analysis in the context of company analysis?

Understanding the strengths and weaknesses of a business model Signup and view all the answers

Which of the following is a potential drawback of relying solely on direct communication with company management?

Personal interaction can lead to biased evaluations Signup and view all the answers

Why is it important to analyze both qualitative and quantitative aspects of a company?

To ensure a complete understanding of the business dynamics Signup and view all the answers

What could lead to an analyst making an incorrect assessment of a company's value?

Ignoring qualitative factors in the business strategy Signup and view all the answers

Which type of analysis would involve reviewing cash flows and balance sheets over several years?

Quantitative analysis Signup and view all the answers

How can the pitch, game type, and opposition's bowling strengths serve as an analogy for company performance analysis?

They illustrate the variability of business operational environments Signup and view all the answers

What is a common risk when analysts interact directly with company management?

Management potentially exaggerates the favorable aspects to sway opinions Signup and view all the answers

What influences the need for analysts to adopt a two-dimensional approach in studying companies?

The significant variation in company approaches despite industry similarity Signup and view all the answers

What is the primary purpose of securities in the financial market?

To facilitate ownership transfer and raise funds Signup and view all the answers

Which of the following best describes the role of a securities market?

It creates liquidity by connecting numerous buyers and sellers Signup and view all the answers

What does the term 'dematerialization' refer to in the context of securities?

The conversion of physical securities into electronic form Signup and view all the answers

How do securities benefit both issuers and investors?

Both parties have aligned objectives where issuers raise capital and investors gain returns Signup and view all the answers

What type of products can be classified as securities?

Equity shares, bonds, and debentures Signup and view all the answers

What is meant by 'liquidity' in the context of securities markets?

The ease of purchasing and selling securities at market prices Signup and view all the answers

What is a key benefit of having a well-functioning securities market?

It facilitates the efficient movement of capital in the economy Signup and view all the answers

Which of the following statements about the objectives of securities issuance is true?

Issuers raise funds while providing investors an opportunity to exit Signup and view all the answers

What is the most important quality an analyst should possess to analyze various financial factors?

High degree of comfort in dealing with numbers Signup and view all the answers

What is the primary role of a Research Analyst?

To help clients take informed decisions Signup and view all the answers

What skills are required for a research analyst to understand business models and competitive dynamics?

Methodical and enquiring mind Signup and view all the answers

What is the main purpose of a research report?

To help clients take informed decisions Signup and view all the answers

Which of the following is a desired quality in a good research analyst?

Ability to read and comprehend financial statements and reports Signup and view all the answers

What is the role of a sell-side analyst?

To provide research reports to money managers Signup and view all the answers

What is the main difference between a research analyst and a portfolio manager?

A research analyst analyzes financial data while a portfolio manager makes investment decisions Signup and view all the answers

What skills are required for a research analyst to identify trends and see the inter-relationship between different factors?

Methodical and enquiring mind Signup and view all the answers

What is the primary function of Participatory Notes (P-Notes)?

To provide a means for foreign investors to invest in Indian securities without registering Signup and view all the answers

Which statement accurately describes mutual funds?

They pool money from numerous investors to purchase various securities. Signup and view all the answers

What role does a fund manager play in a mutual fund?

They take decisions about investment strategies and company portfolios. Signup and view all the answers

Why is diversification an important strategy in mutual fund investing?

It helps to reduce the risk of financial loss for investors. Signup and view all the answers

What distinguishes life insurance from general insurance?

Life insurance protects against loss of life while general insurance covers various other assets. Signup and view all the answers

What is a key characteristic of insurance companies in the context of investments?

They have a large corpus and actively invest in various financial instruments. Signup and view all the answers

How are investment decisions made within mutual funds?

They are made by a designated fund manager with the help of a research team. Signup and view all the answers

What type of insurance company primarily focuses on insuring life-related assets?

Life insurance companies Signup and view all the answers

Which of the following is NOT a primary responsibility of a Research Analyst?

Developing and managing investment portfolios Signup and view all the answers

What is the primary role of a Research Analyst?

To provide investment advice to clients based on their individual needs and risk tolerance Signup and view all the answers

Which of the following is a key quality desired in a Research Analyst?

All of the above Signup and view all the answers

Which of the following is a basic principle of interaction with companies and/or clients?

All of the above Signup and view all the answers

What is the main difference between the work of a Research Analyst and a typical consumer researching a phone purchase?

All of the above Signup and view all the answers

What is the significance of the 'Analysis' step in the research process?

All of the above Signup and view all the answers

What is the role of 'Research' in the decision-making process for investors?

All of the above Signup and view all the answers

How is the work of a Research Analyst similar to a consumer researching a new phone?

All of the above Signup and view all the answers

What is the primary function of a clearing corporation in the equity trade life cycle?

To provide novation of contracts between buyers and sellers Signup and view all the answers

What is the purpose of margins charged by the clearing corporation?

To handle the risk of default by buyers and sellers Signup and view all the answers

What is the difference between clearing and settlement?

Clearing is the process of ascertaining net obligations while settlement is the process of delivering shares and paying money Signup and view all the answers

How do OTC transactions differ from exchange-traded transactions in terms of settlement?

OTC transactions are settled directly between counterparties, while exchange-traded transactions are settled through a clearing corporation Signup and view all the answers

What is the benefit of the clearing corporation providing novation of contracts?

It reduces the counterparty risk for investors Signup and view all the answers

What is the purpose of the obligation report provided by the clearing house?

To notify brokers and custodians of their settlement obligations Signup and view all the answers

What is the consequence of failing to settle obligations on time?

Penalties will be imposed Signup and view all the answers

Which of the following is NOT a characteristic of warrants issued by companies?

They are typically issued by companies with a strong track record of profitability. Signup and view all the answers

What is the primary role of the clearing corporation in managing risk?

To take on the credit risk of buyers and sellers Signup and view all the answers

What is the primary purpose of market indices?

To provide a benchmark for the performance of the overall market. Signup and view all the answers

Which of the following factors is NOT considered when selecting stocks for inclusion in an index?

Profitability of the company. Signup and view all the answers

Which of the following statements is TRUE regarding the S&P BSE Sensex?

It is composed of 30 chosen stocks on the BSE, weighted by market capitalization. Signup and view all the answers

Which of the following indices is NOT composed of stocks listed on the National Stock Exchange (NSE)?

S&P BSE Sensex Signup and view all the answers

Why is it important for indices to be reviewed and modified periodically?

To ensure that the index accurately reflects the performance of the market. Signup and view all the answers

What is the key difference between warrants and convertible warrants?

Warrants can be converted into shares, while convertible warrants cannot be converted. Signup and view all the answers

Which of the following statements about the Nifty 50 index is TRUE?

It is composed of 50 most representative stocks listed on the National Stock Exchange, weighted by market capitalization. Signup and view all the answers

What is a preferential issue?

An issue of specified securities by a listed issuer to any select person or group of persons on a private placement basis. Signup and view all the answers

Which of the following is NOT a requirement for a company to issue bonus shares?

The company must have a positive net income in the previous fiscal year. Signup and view all the answers

What are the options available to an investor who has been awarded right shares?

Exercise the right, transfer the right to another investor, or let the rights lapse. Signup and view all the answers

Which of the following statements about private placements is TRUE?

A privately placed security can be listed on a stock exchange if it meets the listing requirements of SEBI and the stock exchange. Signup and view all the answers

What is the difference between rights issues and bonus issues?

Rights issues are issued at a specific price, while bonus issues are issued without any consideration. Signup and view all the answers

What is the purpose of the lock-in period for private placements?

To prevent insider trading by the investors who receive the securities. Signup and view all the answers

What is the role of SEBI in preferential issues?

SEBI regulates the pricing, disclosures, and lock-in periods for preferential issues. Signup and view all the answers

What is the main difference between a public issue and a private placement?

Public issues are offered to a wider pool of investors, while private placements are offered only to select investors. Signup and view all the answers

What is the main purpose of an Initial Public Offer (IPO)?

To raise equity capital for further business growth Signup and view all the answers

Which type of offering allows the public to buy newly issued shares of a company?

Public issue Signup and view all the answers

What is the minimum percentage of shares that should be allocated to retail investors in an eligible issue?

35% Signup and view all the answers

Who defines the eligibility criteria for companies raising capital from the public?

The Securities and Exchange Board of India (SEBI) Signup and view all the answers

In a primary market offering, what is a public issue primarily considered?

A retail issue of securities Signup and view all the answers

What is an anchor investor in the context of primary market securities?

A large institutional investor that helps stabilize the offering Signup and view all the answers

Which of the following is true about the proportion of shares allocated to qualified institutional investors in eligible issues?

They can be allocated up to 50% of total shares Signup and view all the answers

Which of the following factors is NOT specified by SEBI regulations for conducting an IPO?

Period of dividend distribution Signup and view all the answers

What is the primary objective of NISM?

To enhance the quality and standards of professionals in the financial services sector Signup and view all the answers

What does NISM engage in besides capacity building and research?

Professional education and literacy Signup and view all the answers

What is the significance of the workbook?

It assists candidates in preparing for the Research Analyst Certification Examination Signup and view all the answers

What is the role of regulatory bodies in the financial market according to the provided text?

Not mentioned in the provided text Signup and view all the answers

What is the workbook version applicable from?

June 30, 2023 Signup and view all the answers

What type of education does NISM provide?

Professional education Signup and view all the answers

Who does NISM work closely with?

Financial sector regulators Signup and view all the answers

What is the purpose of NISM Certification programs?

To enhance the quality and standards of professionals in the financial services sector Signup and view all the answers

Which of the following is NOT a characteristic of an equity share?

Provides guaranteed return on investment Signup and view all the answers

Which of the following is NOT a key element in the definition of 'securities' as outlined in the text?

Represents ownership in a tangible asset like gold Signup and view all the answers

What is the primary function of the Securities and Exchange Board of India (SEBI) in relation to equity shares?

Regulating the trading of equity shares on stock exchanges Signup and view all the answers

Which of the following are considered investors in equity shares, as mentioned in the text?

All of the above Signup and view all the answers

Which of the following is NOT a category of financial products in the Indian securities market?

Commodities Signup and view all the answers

What does the term 'Electronic Gold Receipt' (EGR) represent, as defined in the text?

An electronic receipt issued against a deposit of physical gold Signup and view all the answers

Which of the following is NOT a characteristic of equity shareholders as described in the text?

They are guaranteed a fixed return on their investment Signup and view all the answers

What is the main distinction between equity shares and debt instruments?

Equity shares represent ownership, while debt instruments represent lending Signup and view all the answers

What is a key advantage of issuing convertible debentures for the issuer?

No obligation to repay the debt on maturity Signup and view all the answers

What is a potential disadvantage for existing shareholders when convertible debentures are converted into equity?

Dilution of their ownership percentage Signup and view all the answers

How do investors benefit from convertible debentures in the initial stages of a project?

Higher returns from fixed coupon payments Signup and view all the answers

What is the process involved in issuing a depositary receipt?

A bank places equity shares in its custodian account and issues certificates to investors Signup and view all the answers

Which of the following describes the characteristics of depositary receipts?

They are denominated in the local currency of the issuing market Signup and view all the answers

Who ultimately benefits from the shares upon the conversion of a convertible debenture?

The investors who hold the convertible debentures Signup and view all the answers

What is a common outcome when a company's convertible debenture is converted into shares?

Issuance of new shares leading to dilution of existing shareholders' stakes Signup and view all the answers

What defines the market for depositary receipts like IDRs, GDRs, and ADRs?

They can be traded in both domestic and international markets Signup and view all the answers

Who is eligible to be registered as a Depository Participant (DP)?

Registered stock brokers and foreign banks operating in India Signup and view all the answers

What is the primary duty of Trading Members in the stock market?

To facilitate buy and sell transactions of investors Signup and view all the answers

What changed regarding sub-brokers in Indian securities markets after April 2019?

Sub-brokers ceased to exist and migrated to become Authorised Persons or Trading Members. Signup and view all the answers

Who can appoint Authorized Persons in the stock market?

Stock brokers or trading members Signup and view all the answers

Which of the following is NOT a criterion for becoming a Trading Member of a Stock Exchange?

Offering financial advisory services to clients Signup and view all the answers

What is a key feature of the role of an Authorized Person in the stock market?

They act as agents for stock brokers to connect with investors. Signup and view all the answers

What does SEBI stand for and what is its role in securities markets?

Securities Exchange Board of India; it regulates securities and protects investors. Signup and view all the answers

What is the primary difference between qualitative and quantitative analysis of companies?

Qualitative analysis examines management capabilities, while quantitative focuses on financial statements. Signup and view all the answers

Which type of financial institutions are allowed to register as Depository Participants?

Public financial institutions and clearing houses Signup and view all the answers

Why is personal communication with management considered valuable for analysts?

It provides insights into the company's vision and strategy. Signup and view all the answers

What might be a negative aspect of personal communication with company management?

Management could exaggerate positives to influence market perception. Signup and view all the answers

Which of the following analytical approaches focuses on understanding corporate management's qualifications?

Qualitative analysis Signup and view all the answers

What is the role of analysts in assessing financial statements?

To interpret data for potential 'painted rosy pictures'. Signup and view all the answers

Which of the following is NOT a focus area for quantitative understanding of financial data?

Market trends Signup and view all the answers

What might be a consequence of relying solely on internet sources for company information?

The analysis may lack depth and personal insight. Signup and view all the answers

In analyzing companies, what does the quantitative aspect emphasize?

Examining historical financial performance and statements. Signup and view all the answers

What is the main objective of NISM Certification programs?

To enhance the quality and standards of professionals employed in various segments of the financial services sector. Signup and view all the answers

What does NISM engage in, among other activities?

Fostering policy research and capacity building among stakeholders in the securities markets. Signup and view all the answers

What is the primary role of the National Institute of Securities Markets?

To provide high-end professional education, certifications, training, and research in financial markets. Signup and view all the answers

What is the main function of the National Institute of Securities Markets in the context of financial education?

To work closely with all financial sector regulators in the area of financial education. Signup and view all the answers

What is the main objective of the workbook developed by NISM?

To assist candidates in preparing for the National Institute of Securities Markets Certification Examination. Signup and view all the answers

What is the significance of the workbook version mentioned in the content?

It is applicable for candidates appearing for NISM Series XV: Research Analyst Certification Examination on or after June 30, 2023. Signup and view all the answers

Which type of depositary receipts are issued by a non-Indian company and traded in the Indian market?

Indian Depositary Receipts (IDRs) Signup and view all the answers

What is the address of the NISM Patalganga Campus?

Plot IS-1 & IS-2, Patalganga Industrial Area, Village Mohopada (Wasambe), Taluka-Khalapur, District Raigad-410222 Signup and view all the answers

What do companies get from issuing depositary receipts?

A wider investor base from the international markets Signup and view all the answers

What is the copyright year of the workbook?

2020 Signup and view all the answers

What type of bonds are foreign currency denominated convertible debt papers issued by companies in international markets?

Foreign Currency Convertible Bonds (FCCBs) Signup and view all the answers

What right do investors holding depositary receipts have?

Right to dividends and capital appreciation Signup and view all the answers

What is the primary purpose of Global Depositary Receipts (GDRs)?

To trade in more than one country Signup and view all the answers

Which Indian companies have issued American Depositary Receipts (ADRs)?

Infosys, Wipro, ICICI Bank, and HDFC Bank Signup and view all the answers

What is the current status of voting rights for DR holders in India?

Voting rights are under consideration of SEBI Signup and view all the answers

What is the benefit of depositary receipts for investors?

Investors can invest in international stocks through domestic exchanges Signup and view all the answers

What is the primary role of a custodian?

To settle transactions in securities and keep track of corporate actions on behalf of its clients Signup and view all the answers

What is the function of a clearing corporation?

To ensure that members on the Stock Exchange meet their obligations to deliver funds or securities Signup and view all the answers

What is the role of a clearing bank?

To act as an important intermediary between clearing members and the clearing corporation Signup and view all the answers

What is the primary function of merchant bankers?

To help an issuer access the security market with an issuance of securities Signup and view all the answers

What is the responsibility of a clearing member?

To ensure that the funds are available in its account with clearing bank on the day of pay-in Signup and view all the answers

What happens on the day of pay-out?

The clearing member receives the amount in their account with clearing bank Signup and view all the answers

What does a custodian help with?

Maintaining a client's securities and funds account and collecting benefits or rights accruing to the client Signup and view all the answers

What is the relationship between a clearing corporation and the Stock Exchanges?

The clearing corporation is a separate entity from the Stock Exchanges Signup and view all the answers

Which of the following methods is NOT considered a part of a preferential issue of securities?

Public issue Signup and view all the answers

What is a key difference between a rights issue and a bonus issue?

Rights issues are offered at a specific price, while bonus issues are given free of charge. Signup and view all the answers

What condition must a company meet to be able to issue bonus shares?

The company must have sufficient retained earnings. Signup and view all the answers

What is a possible outcome for an investor who is awarded rights shares?

All of the above Signup and view all the answers

Which of the following statements about private placements is CORRECT?

A privately placed security can be listed on a stock exchange if it meets certain requirements. Signup and view all the answers

What is a key characteristic of a preferential issue of securities?

It is offered to a select group of individuals or institutions. Signup and view all the answers

What is the main reason why SEBI regulates preferential issues?

To protect the interests of existing shareholders. Signup and view all the answers

Which of the following is NOT a requirement for a company to issue bonus shares?

A high stock price Signup and view all the answers

What percentage of the portion allocated to Qualified Institutional Buyers (QIBs) can anchor investors be allocated?

60% Signup and view all the answers

For which purpose does a company generally engage in a Follow on Public Offer (FPO)?

To raise additional capital for growth Signup and view all the answers

What is a primary characteristic of Qualified Institutional Placements (QIPs)?

Private placements made only to specific institutional investors Signup and view all the answers

What is the limit on the number of investors a company can issue shares to under private placement according to the Companies Act 2013?

50 Signup and view all the answers

What is the role of anchor subscriptions in an IPO context?

They act as a measure of the offer's quality. Signup and view all the answers

Which of the following is a reason for a company to raise equity capital through a follow-on public offer?

To meet regulatory public shareholding requirements Signup and view all the answers

What encompasses Qualified Institutional Buyers (QIBs)?

Financial institutions, mutual funds, and banks Signup and view all the answers

Which of the following is NOT a form of private placement?

Initial Public Offerings (IPOs) Signup and view all the answers

What should analysts do before meeting a company's management?

Thoroughly learn about the company's products, industry and competitors Signup and view all the answers

Why is it important for analysts to have clarity of thoughts and good listening ability?

To have effective communication with the management Signup and view all the answers

What is an important principle that analysts must keep in mind while talking to the management?

Have an independence and neutrality of view Signup and view all the answers

What can analysts use to acquire more contacts relevant to the research?

Their network Signup and view all the answers

Who can provide meaningful inputs to analysts in the research process?

Competitors and other stakeholders of the business Signup and view all the answers

What is the primary advantage of CLDs for investors?

They provide an opportunity to earn returns from commodity markets with no capital risk. Signup and view all the answers

Why is it important for analysts to cross-verify the claims of the management?

To ensure the accuracy of the information provided Signup and view all the answers

What is an essential aspect of an analyst's research?

Based on factual information and an unbiased opinion Signup and view all the answers

What is the primary purpose of MBS and ABS?

To create assets from illiquid financial assets. Signup and view all the answers

What is the main purpose of analysts meeting with a company's management?

To verify the claims of the management Signup and view all the answers

What is the minimum percentage of assets that REITs must hold in revenue-generating real estate?

80% Signup and view all the answers

What is the characteristic of commodities?

They are largely homogenous in nature. Signup and view all the answers

What is the role of cash flows from financial assets in MBS and ABS?

They are used for both interest and principal repayment obligations. Signup and view all the answers

What is the primary function of a clearing corporation in the context of equity trade life cycle?

To provide settlement guarantees to counterparties Signup and view all the answers

What is a key benefit of REITs and InvITs?

They distribute at least 90% of the distributable surplus cash flow to unit holders. Signup and view all the answers

What is the regulatory requirement for InvITs regarding their unit capital?

At least 90% of the unit capital should be invested in revenue-generating infrastructure projects. Signup and view all the answers

What type of margin is charged by the clearing corporation to handle the risk of default by buyers and sellers?

All of the above, including mark to market (MTM) margins Signup and view all the answers

What do REITs and InvITs invest in?

Revenue-generating real estate and infrastructure projects. Signup and view all the answers

What is the role of the clearing corporation in reducing counterparty risk in exchange traded transactions?

It acts as a seller to every buyer and buyer to every seller Signup and view all the answers

What is the consequence for brokers and custodians if they fail to settle their money or securities obligations within the specified deadlines?

They are required to pay penalties Signup and view all the answers

How do OTC transactions differ from exchange traded transactions in terms of settlement?

OTC transactions are settled directly between counterparties, while exchange traded transactions are settled through a clearing corporation Signup and view all the answers

What is the purpose of the obligation report provided by the Clearing House to brokers and custodians?

To require brokers and custodians to settle their money or securities obligations within specified deadlines Signup and view all the answers

What is novation of contracts in the context of clearing corporations?

The process of replacing contracts between buyers and sellers with contracts between the clearing corporation and counterparties Signup and view all the answers

Why do clearing corporations charge margins to counterparties?

To handle the risk of default by buyers and sellers Signup and view all the answers

What is the primary difference between a public issue of securities and a private placement?

A public issue is regulated by SEBI, while a private placement is not. Signup and view all the answers

What are the three options available to an investor who has been awarded right shares?

Exercise the right, sell the right, or let the right lapse. Signup and view all the answers

What is the key difference between rights issues and bonus issues?

Rights issues involve a purchase price for shares, while bonus issues are given free of charge. Signup and view all the answers

What is the main requirement for a company to issue bonus shares?

The company must have a sufficient amount of retained earnings. Signup and view all the answers

Which of the following is NOT a characteristic of a preferential issue?

It is subject to the same regulations as a public issue of securities. Signup and view all the answers

Which of the following is NOT a valid option for an investor who has been awarded rights shares?

Redeem the rights for cash. Signup and view all the answers

What is the primary purpose of a rights issue?

To raise capital for the company. Signup and view all the answers

What is the impact of issuing bonus shares on a company's financial statements?

Decreases retained earnings and increases share capital. Signup and view all the answers

What is the primary purpose of qualitative company analysis, as described in the text?

To assess the quality of a company's management and the effectiveness of its business model. Signup and view all the answers

Which of the following is NOT mentioned as a benefit of direct interaction with company management?

Understanding the company's financial performance in greater detail. Signup and view all the answers

What is a potential risk associated with direct communication with company management?

Management may provide biased or misleading information to influence market perceptions. Signup and view all the answers

What is the main difference between qualitative and quantitative analysis of companies?

Qualitative analysis relies on subjective judgments and observations, while quantitative analysis uses objective data and mathematical calculations. Signup and view all the answers

How does the comparison between athletes and companies in the text illustrate the importance of company analysis?

Like athletes, companies can be analyzed based on both their quantitative and qualitative characteristics to understand their performance. Signup and view all the answers

Which of the following is NOT a factor mentioned in the text that could affect a company's performance compared to its peers?

The company's geographic location and regulatory environment. Signup and view all the answers

What is the significance of the statement "only with probability and not with certainty" in relation to analyzing company performance?

Analysts must consider multiple factors when evaluating a company, and there is no guarantee that their conclusions will be accurate. Signup and view all the answers

What is the primary message conveyed by the text about the role of internet in company analysis?

Internet research can supplement, but not replace, direct interaction with companies and clients to obtain a complete understanding. Signup and view all the answers

What is the main purpose of corporate actions?

To restructure the company's capital Signup and view all the answers

What is the difference between price and value?

Price is the market value, value is the intrinsic value Signup and view all the answers

What is the purpose of valuation?

To determine the intrinsic value of a business Signup and view all the answers

What is the Discounted Cash Flows Model used for?

To calculate the present value of future cash flows Signup and view all the answers

What is the concept of return on investment?

The return generated by an investment Signup and view all the answers

What is the concept of risk in investments?

The possibility of losing some or all of the investment Signup and view all the answers

What is the purpose of a research report?

To provide an analysis of a company's financials Signup and view all the answers

What is the role of regulatory bodies in the financial market?

To regulate the activities of market participants Signup and view all the answers

What is the purpose of the Code of Conduct for Research Analysts?

To ensure the integrity of research reports Signup and view all the answers

What is the purpose of exchange surveillance mechanisms?

To detect and prevent irregularities in trading Signup and view all the answers

What is the primary way in which Equity Linked Debentures (ELDs) provide equity participation to investors?

Investing a portion of the principal in options that provide exposure to equity returns. Signup and view all the answers

Which of the following accurately describes the interest payment structure of both Equity Linked Debentures (ELDs) and Commodity Linked Debentures (CLDs)?

Variable interest rates linked to the performance of a specific commodity or equity asset. Signup and view all the answers

What is the main difference between Foreign Currency Convertible Bonds (FCCBs) and Equity Linked Debentures (ELDs) in terms of their underlying asset?

FCCBs are linked to foreign currency exchange rates, while ELDs are linked to equity assets. Signup and view all the answers

How does the issuer of an ELD ensure principal protection for the investor?

By investing a portion of the principal in fixed income securities. Signup and view all the answers

Which of the following statements is TRUE regarding the credit risk associated with Equity Linked Debentures (ELDs)?

ELDs still carry credit risk despite the principal protection feature. Signup and view all the answers

What is the currency in which dividend payments are made when an FCCB is converted into equity?

Indian Rupees. Signup and view all the answers

Which regulatory body oversees the issuance of Foreign Currency Convertible Bonds (FCCBs) in India?

The Reserve Bank of India (RBI). Signup and view all the answers

Which of the following instruments is MOST similar to an Equity Linked Debenture (ELD) in terms of its structure and risk-reward profile?

A convertible bond. Signup and view all the answers

What should research analysts avoid in their suggestions to clients?

Optimistic or biased views Signup and view all the answers

Which of the following is essential for communicating findings in research reports?

Simple and clear expression Signup and view all the answers

What must research analysts disclose if a conflict of interest arises?

Ownership of shares in the company Signup and view all the answers

Which quality is NOT typically required from a research analyst?

Ability to manipulate data Signup and view all the answers

When should analysts prepare a questionnaire for management meetings?

When they lack specific areas of understanding Signup and view all the answers

Which statement best reflects the ethical responsibilities of research analysts?

Communicating findings without bias Signup and view all the answers

What is a recommended practice when interviewing management?

Using recording devices after obtaining consent Signup and view all the answers

What is a critical component of producing a research report?

Clearly stating assumptions Signup and view all the answers

What is a preferential issue?

An issue of specified securities to select persons on a private placement basis. Signup and view all the answers

Which of the following is NOT included in the definition of preferential issue?

Private placement of securities Signup and view all the answers

What is one requirement imposed by SEBI for preferential issues?

Compliance with pricing and disclosure norms. Signup and view all the answers

Which option is NOT a choice available to investors awarded right shares?

Sell the right shares for immediate cash Signup and view all the answers

What must companies have in order to issue bonus shares?

A sufficient amount of retained earnings. Signup and view all the answers

What happens to the retained earnings when a bonus issue is made?

They are transferred to share capital. Signup and view all the answers

What distinguishes a rights issue from a bonus issue?

Rights issue requires payment, bonus issue does not. Signup and view all the answers

Which statement is true about private placement of securities?

It can be done irrespective of prior public offers. Signup and view all the answers

Which of the following is NOT considered a key component of the Financial Market, as outlined in the text?

Financial Advisors Signup and view all the answers

Which of the following is included in the definition of 'securities' under the Securities Contracts (Regulation) Act, 1956 (SCRA)?

Mutual fund units Signup and view all the answers

What is the primary function of securities markets in terms of resource allocation?

Facilitating the transfer of funds from savers to borrowers Signup and view all the answers

Which of the following is NOT a type of 'securities' as defined by the Securities Contracts (Regulation) Act, 1956 (SCRA)?

Treasury Bills Signup and view all the answers

Which of the following best describes the primary role of regulatory bodies in the financial market?

To ensure the smooth functioning and fair operation of the market Signup and view all the answers

Which of the following is a key reason for the existence of securities markets?

To provide a platform for the trading of financial assets Signup and view all the answers

What is the primary purpose of the financial market?

To facilitate the transfer of funds from savers to borrowers Signup and view all the answers

Which of the following is NOT a benefit provided by securities markets to investors?

Guaranteed returns on their investments Signup and view all the answers

Which type of analyst works for firms that provide investment banking, broking, and advisory services for clients, and their reports are available to the public?

Sell-side Analysts Signup and view all the answers

Which of the following is NOT a common client for Independent Research Analysts?

Fund Managers Signup and view all the answers

What is the primary purpose of research reports generated by Buy-side Analysts?

To provide investment recommendations for their own investment accounts or on behalf of their clients Signup and view all the answers

Which of the following best describes the role of Independent Research Analysts?

They provide customized research reports on a subscription basis to a variety of clients Signup and view all the answers

Which of the following is a key difference between Sell-side and Buy-side analysts?

Sell-side analysts work for firms that provide investment banking, broking, and advisory services, while Buy-side analysts work for asset managers Signup and view all the answers

Which type of analyst is LEAST likely to have their research reports widely distributed to the public?

Buy-side Analysts Signup and view all the answers

Why might a company seeking to understand the competitive landscape in its industry hire an Independent Research Analyst?

To obtain an unbiased assessment of the industry and their competitors Signup and view all the answers

What is a key reason why the research reports of Buy-side Analysts are generally not available to the public?

The information contained in the reports is often proprietary and confidential Signup and view all the answers

What is the main role of a custodian?

To hold funds and securities of institutional clients and settle transactions Signup and view all the answers

What is the primary function of a clearing corporation?

To guarantee settlement of all transactions on the Stock Exchanges Signup and view all the answers

What is the role of a clearing bank?

To act as an important intermediary between clearing members and the clearing corporation Signup and view all the answers

What is the primary role of a merchant banker?

To act as an issue manager for new security issuances Signup and view all the answers

What is the responsibility of a clearing member?

To ensure that funds are available in their account with the clearing bank on the day of pay-in Signup and view all the answers

What is the result of a pay-out in a clearing bank?

The clearing member receives the amount in their account with the clearing bank Signup and view all the answers

What is the role of a custodian in tracking corporate actions?

To keep track of corporate actions on behalf of clients Signup and view all the answers

What is the purpose of a clearing corporation?

To safeguard the interest of investors in the securities market Signup and view all the answers

What is the primary focus of a research analyst when evaluating an industry?

Analyzing the regulatory environment and business models Signup and view all the answers

Which macro-economic factor is NOT typically considered by research analysts?

Fiscal policies of foreign governments Signup and view all the answers

How do research analysts aid investment decisions regarding companies?

By providing a thorough analysis of past and expected future performance Signup and view all the answers

Which of the following aspects is NOT a key consideration for research analysts when understanding the economy?

Regulatory challenges specific to industries Signup and view all the answers

Which economic component directly affects the growth potential of companies, according to research analysts?

Fiscal and monetary policies Signup and view all the answers

What role does understanding consumer behavior play for research analysts?

It provides insight into demand sensitivity and market opportunities. Signup and view all the answers

Which factor is least likely to be analyzed by research analysts when predicting future company performance?

Trends in employee satisfaction surveys Signup and view all the answers

What key outcome is expected from a research analyst's evaluation of a company's performance?

To make informed investment recommendations Signup and view all the answers

What are securities primarily used for by issuers?

To raise funds for future investments Signup and view all the answers

Which key feature of securities markets facilitates the buying and selling of securities?

Liquidity Signup and view all the answers

What is the primary benefit to investors from owning securities?

Ability to convert savings into financial assets Signup and view all the answers

What is the first step an analyst should take before meeting a company's management?

Conduct thorough research on the company's products, industry, and competitors. Signup and view all the answers

What type of financial instruments are included in the definition of securities?

Equity shares, preference shares, debentures, bonds Signup and view all the answers

Which principle should analysts follow to maintain an unbiased opinion during their research?

Ensure all analysis is based on factual information. Signup and view all the answers

How do securities markets benefit both issuers and investors?

By facilitating ownership transfer without issuer impact Signup and view all the answers

Why is it important for analysts to communicate their need for public information only to management?

To avoid potential misinformation and legal issues. Signup and view all the answers

What type of contacts can analysts seek to enhance their research beyond company management?

Suppliers, distributors, and customers. Signup and view all the answers

What is dematerialization in the context of securities?

The process of converting physical securities into electronic form Signup and view all the answers

What should analysts do if they have the opportunity to interview management?

Approach the interview with thorough preparation and insights. Signup and view all the answers

What role do investors play in the securities market?

Buyers and sellers of securities Signup and view all the answers

Which of the following statements best describes the independence and neutrality of view required from analysts?

Analysts must maintain objectivity based on factual information. Signup and view all the answers

Which statement accurately describes the securities market?

It facilitates investment opportunities by creating liquidity Signup and view all the answers

Why might analysts benefit from using their network during research?

To gather diverse perspectives from various stakeholders. Signup and view all the answers

What aspect of management communication is essential for analysts to ensure clarity?

Communicating clearly and listening effectively. Signup and view all the answers

What is the primary purpose of an analyst's meeting with a company's management?

To verify the claims of the management and gain insights into the company's performance and plans Signup and view all the answers

What should analysts do before meeting with a company's management?

Thoroughly research the company's products, industry, and competitors Signup and view all the answers

What is essential for analysts to maintain during research?

Independence and neutrality of view Signup and view all the answers

Who can provide valuable insights to analysts during research?

Competitors and other stakeholders such as suppliers, distributors, and customers Signup and view all the answers

What can analysts use to acquire more contacts relevant to their research?

Their network of contacts relevant to the research Signup and view all the answers

Why is it essential for analysts to thoroughly research a company before meeting with management?

To make the most of the limited opportunities to meet with management Signup and view all the answers

What should analysts avoid revealing during their meeting with management?

Information not available in the public domain Signup and view all the answers

What is the primary aim of NISM certification examinations and educational programs?

To provide a structured learning plan and career path Signup and view all the answers

What is the primary benefit of analysts maintaining independence and neutrality of view during research?

To provide unbiased opinions Signup and view all the answers

What does the workbook cover?

Basics of equity research and writing a good research report Signup and view all the answers

How many certificates have been issued by NISM till March 2023?

Over 17 lakh Signup and view all the answers

What is the focus of NISM certification examinations and educational programs?

Various market products and functions Signup and view all the answers

What is the role of NISM in supporting candidates?

By providing lucid and focused workbooks Signup and view all the answers

What is the purpose of the workbook according to Dr. C.K.G?

To learn about various aspects of equity research Signup and view all the answers

What does the workbook cover with respect to company analysis?

Both qualitative and quantitative dimensions Signup and view all the answers

What is the significance of NISM certifications?

To provide a career path in the securities market Signup and view all the answers

What is the concept on which initial margin is based?

Value At Risk Signup and view all the answers

What is the role of a Depository in the securities market?

To hold securities of investors in electronic form Signup and view all the answers

What is the purpose of a Depository Participant?

To interface with investors and provide depository services Signup and view all the answers

Who manages the funds and securities settlement?

Clearing and Settlement Agencies Signup and view all the answers

What is the purpose of a Stock Exchange?

To provide a trading platform where buyers and sellers can transact Signup and view all the answers

What is MTM margin?

Notional loss which an outstanding trade has suffered Signup and view all the answers

How many Depositories are registered with SEBI in India?

Two Signup and view all the answers

Who holds and maintains company-level accounts of securities?

Depository Signup and view all the answers

What is the primary role of a Custodian?

To settle transactions in securities Signup and view all the answers

What is the purpose of Clearing Corporations?

To guarantee settlement of all transactions on the Stock Exchanges Signup and view all the answers

What is the role of a Clearing Bank?

To act as an intermediary between clearing members and the clearing corporation Signup and view all the answers

What is the primary function of Merchant Bankers?

To help an issuer access the security market with an issuance of securities Signup and view all the answers

What is the responsibility of a clearing member in relation to a clearing bank?

To ensure that the funds are available in its account with the clearing bank on the day of pay-in Signup and view all the answers

What does a Custodian do on behalf of its clients?

Maintain a client’s securities and funds account Signup and view all the answers

What is one of the benefits provided by a Custodian to its clients?

Collecting the benefits or rights accruing to the client in respect of securities held Signup and view all the answers

What is the role of Clearing Corporations in ensuring settlement of transactions?

They guarantee settlement of all transactions on the Stock Exchanges Signup and view all the answers

What is a key characteristic of gold ETFs compared to other commodity ETFs?

Gold is easier to store and manage. Signup and view all the answers

What advantage does a managed futures contract provide to investors?

The ability to avoid the physical purchasing of goods. Signup and view all the answers

What is the primary function of a warehouse receipt?

To serve as proof of ownership for goods stored. Signup and view all the answers

What is the primary role of the primary market in the securities market?

Issuing new securities for capital raising. Signup and view all the answers

How do the primary and secondary markets relate to each other?

The primary market supports secondary market liquidity. Signup and view all the answers

Which of the following statements accurately describes managed futures contracts?

They allow for diversification in commodity investments. Signup and view all the answers

What is a fundamental feature of the secondary market?

It facilitates the trading of pre-issued securities. Signup and view all the answers

What distinguishes a negotiable warehouse receipt from a non-negotiable one?

The ability to transfer ownership of the underlying goods. Signup and view all the answers

What is a characteristic that makes precious metals a viable investment option?

Very long life and low storage cost Signup and view all the answers

What is the primary reason investors prefer one design of jewellery over another?

Difference in design Signup and view all the answers

What is the purpose of the disclaimer in the publication?

To disclaim any responsibility for actions taken based on the information Signup and view all the answers

What type of commodities are grown?

Grains and pulses Signup and view all the answers

What is the primary focus of NISM certifications?

To provide a structured learning plan and career path for students and job aspirants Signup and view all the answers

Who is responsible for ensuring the accuracy and completeness of the information in the publication?

The authors and publishers Signup and view all the answers

What is the benefit of investing in commodities?

To protect real value of investment Signup and view all the answers

What is the purpose of seeking professional advice before acting on the information in the publication?

To consider individual circumstances and needs Signup and view all the answers

What is a Commodity ETF?

An exchange-traded fund that invests in a range of physical commodities Signup and view all the answers

What is the scope of NISM certification examinations and educational programs?

They cater to different segments of intermediaries focusing on varied product lines and functional areas Signup and view all the answers

Why does NISM and SEBI not warrant the totality and absolute accuracy of the information?

Because research is still ongoing in the knowledge streams Signup and view all the answers

Why are commodities not suitable investments for most people?

Because of huge storage costs Signup and view all the answers

What is the purpose of the workbook provided by NISM?

To assist candidates in understanding the subject and preparing for NISM Examinations Signup and view all the answers

What is the advantage of investing in precious metals?

Storage cost is very small compared to their value Signup and view all the answers

What is the consequence of not seeking professional advice before acting on the information?

The reader may make wrong moves or take incorrect actions Signup and view all the answers

What topics are covered in the workbook?

Indian securities markets, terminologies used in equity and debt markets, and top-down and bottom-up approach to fundamental research Signup and view all the answers

What is the importance of NISM certification in the securities market?

It ensures that professionals meet the defined minimum common knowledge benchmark for various critical market functions Signup and view all the answers

What is the benefit of investing in a Commodity ETF?

Investors do not have any storage obligation Signup and view all the answers

What is the purpose of the publication?

To provide general reading and educational purpose Signup and view all the answers

Who are the intended users of the publication?

Anyone seeking general reading and educational purpose Signup and view all the answers

What is the number of certificates issued by NISM as of March 2023?

More than 17 lakh certificates Signup and view all the answers

What topic does the book cover in addition to research on companies?

Writing a good research report Signup and view all the answers

What should readers do before following any recommendation in the publication?

Seek professional advice Signup and view all the answers

Who can benefit from the book?

All those who want to learn about the various aspects of equity research Signup and view all the answers

What is the purpose of an Initial Public Offer (IPO)?

To raise equity capital for further growth of the business Signup and view all the answers

What is the minimum percentage of shares that should be allocated to retail investors in an eligible issue?

35% Signup and view all the answers

What is the primary market used for?

Raising fresh capital from investors Signup and view all the answers

What is the main purpose of SEBI regulations in the context of public issue of securities?

To define eligibility criteria for raising capital from public investors Signup and view all the answers

What is an offer for sale in the primary market?

An offer of existing shares by large investors or promoters to the public Signup and view all the answers

What is the significance of the concept of anchor investor introduced by SEBI in 2009?

To stabilize the price of securities after issue Signup and view all the answers

What is the purpose of mandatory listing of shares on a nationwide stock exchange?

To increase transparency and accountability of listed companies Signup and view all the answers

What is the requirement for net tangible assets for companies to raise capital from the public?

Minimum net tangible assets defined by SEBI regulations Signup and view all the answers

What is the main purpose of NISM Certification programs?

To enhance the quality and standards of professionals in the financial services sector. Signup and view all the answers

What is the key benefit of Commodity Linked Debentures (CLDs)?

They provide protection against inflation. Signup and view all the answers

Which of the following is NOT a characteristic of both REITs and InvITs regarding their income distribution?

They are subject to a higher tax rate on distributed income than on undistributed income. Signup and view all the answers

What is the feature of depositary receipts that allows shares to be bought in the local market and converted into DRs?

They can be converted into shares of the issuing company. Signup and view all the answers

What is the purpose of SEBI guidelines for IDRs?

To regulate the issuance and trading of IDRs in India. Signup and view all the answers

Which of the following is NOT a primary responsibility of a Research Analyst?

Developing and managing investment portfolios. Signup and view all the answers

What is the main difference between warrants and convertible warrants?

Warrants give the holder the right to buy shares at a fixed price, while convertible warrants give the holder the right to convert their investment into shares. Signup and view all the answers

Which of the following indices is specifically designed to track mid-cap stocks in India?

S&P BSE MidCap Signup and view all the answers

What is the primary purpose of the Discounted Cash Flows Model for Business Valuation?

To calculate the present value of future cash flows Signup and view all the answers

What is the main difference between Rights Issue and Bonus Issue?

Rights Issue gives existing shareholders the right to purchase additional shares, whereas Bonus Issue is a free distribution of shares to existing shareholders Signup and view all the answers

What is the purpose of the Price-to-Earnings (P/E) ratio in Relative Valuation?

To compare a company's stock price to its earnings per share Signup and view all the answers

What is the main purpose of the Capital Asset Pricing Model (CAPM)?

To estimate the expected return on investment Signup and view all the answers

What is the term for the process of reorganizing a company's capital structure?

Financial Restructuring Signup and view all the answers

What is the purpose of the concept of Margin of Safety?

To determine the safety of an investment Signup and view all the answers

What is the primary purpose of a Share Consolidation?

To reduce the number of outstanding shares Signup and view all the answers

What is the term for the process of buying back a company's own shares?

Buyback of Shares Signup and view all the answers

What is the primary purpose of the Sum-Of-The-Parts (SOTP) Valuation?

To value individual business segments separately Signup and view all the answers

What is the term for the process of combining two or more companies into a single entity?

Merger and Acquisition Signup and view all the answers

What do analysts aim to understand through qualitative analysis of companies?

Strengths and weaknesses of the business model Signup and view all the answers

Which aspect does quantitative analysis primarily focus on?

Balance sheets and profit and loss statements Signup and view all the answers

Why can personal communication with management be beneficial for analysts?

It provides insight into the vision and strategy of the company Signup and view all the answers

What is a potential risk of relying on management insights gathered through personal communication?

It can lead to an overestimation of the company's positives Signup and view all the answers

What kind of financial metrics would analysts consider in quantitative company analysis?

Assets and liabilities over several years Signup and view all the answers

Which of the following is NOT a component of qualitative analysis?

Review of financial ratios Signup and view all the answers

How can direct interaction with a company's management affect analyst reports?

It could introduce biases if management exaggerates their strengths Signup and view all the answers

What is a key difference between qualitative and quantitative analysis in the context of company assessment?

Qualitative examines business strengths, while quantitative analyzes financial performance Signup and view all the answers

Which financial metric helps assess a company's profitability relative to its total assets?

Return on Assets (ROA) Signup and view all the answers

Which ratio indicates how effectively a company is managing its short-term liabilities?

Current Ratio Signup and view all the answers

What does the Debt to Equity Ratio (D/E) measure in a financial context?

Company's financial leverage Signup and view all the answers

Which financial statement provides a snapshot of a company's financial position at a specific point in time?

Balance Sheet Signup and view all the answers

Which ratio best indicates the proportion of revenue that exceeds the cost of goods sold?

Gross Profit Margin Signup and view all the answers

Which metric is crucial for understanding a company's ability to generate cash from its operations?

Cash Flow from Operations Signup and view all the answers

What does a high inventory turnover ratio imply about a company?

High liquidity of inventory Signup and view all the answers

Which financial statement reflects a company's performance over a specific period, showing revenues and expenses?

Income Statement Signup and view all the answers

What does the Return on Equity (ROE) ratio measure in a company's financial analysis?

Profitability relative to shareholders' equity Signup and view all the answers

Which ratio is commonly used to assess the efficiency of a company's asset utilization?

Return on Assets (ROA) Signup and view all the answers

What is the concept behind initial margin?

Value At Risk philosophy Signup and view all the answers

What is the primary function of a Stock Exchange?

To facilitate trading in already issued securities Signup and view all the answers

What is the role of a Depository?

To hold securities in electronic form Signup and view all the answers

What is the function of a Depository Participant?

To provide depository services to investors Signup and view all the answers

How many Depositories are registered with SEBI in India?

2 Signup and view all the answers

What is the main difference between initial margin and MTM margin?

Initial margin is calculated based on Value At Risk philosophy, while MTM margin is calculated based on notional loss Signup and view all the answers

What is the role of clearing and settlement agencies appointed by Stock Exchanges?

To manage the funds and securities settlement that arise out of trades Signup and view all the answers

What is the relationship between a Depository and a Depository Participant?

A Depository Participant is an agent of the Depository Signup and view all the answers

What is the main purpose of a clearing corporation in the context of exchange-traded securities?

To guarantee the settlement of trades and reduce counterparty risk. Signup and view all the answers

How does a clearing corporation manage the risk of default by buyers or sellers?

By requiring buyers and sellers to maintain margin accounts. Signup and view all the answers

What is the key difference in risk management between OTC transactions and exchange-traded transactions?

OTC transactions do not involve a clearing corporation. Signup and view all the answers

Which of the following is NOT a type of margin typically charged by a clearing corporation?

Capital gains margin Signup and view all the answers

What is the primary advantage of a clearing corporation's involvement in exchange-traded securities?

Reduced counterparty risk for investors. Signup and view all the answers

What is the role of a stock exchange in the clearing and settlement process?

To provide the clearing corporation with details of all transactions. Signup and view all the answers

What does 'novation' mean in the context of clearing corporations?

The replacement of original parties to a contract with the clearing corporation. Signup and view all the answers

What is the main reason why clearing corporations charge various types of margins?

To manage the risk of default by buyers or sellers. Signup and view all the answers

What is the primary role of a Custodian in the financial market?

They safeguard securities and funds for large institutional clients. Signup and view all the answers

Which entity acts as a legal counterparty to all trades on a stock exchange, ensuring the settlement of transactions?

Clearing Corporation Signup and view all the answers

What is the main function of a Clearing Bank in the financial market?

They act as intermediaries between clearing members and the clearing corporation. Signup and view all the answers

What is the primary role of a Merchant Banker in the financial market?

They provide investment advice and help companies access the capital market. Signup and view all the answers

Which entity is responsible for ensuring that funds are available in the clearing member’s account on the day of pay-in?

Clearing Bank Signup and view all the answers

What is the primary responsibility of a Clearing Corporation?

To ensure that members on the Stock Exchange meet their obligations to deliver funds or securities. Signup and view all the answers

What is the purpose of a Clearing Member maintaining an account with a Clearing Bank?

To ensure they have sufficient funds to meet their obligations arising from trades. Signup and view all the answers

Which of the following entities is NOT directly involved in the process of settling transactions on a stock exchange?

Merchant Banker Signup and view all the answers

What is the primary feature of Foreign Currency Convertible Bonds (FCCBs)?

They are generally optionally convertible and issued offshore. Signup and view all the answers

How do Equity Linked Debentures (ELDs) generate returns for investors?

By tying interest rates to the performance of equity assets. Signup and view all the answers

What is a key risk associated with Equity Linked Debentures (ELDs)?

They carry credit risk despite capital protection features. Signup and view all the answers

What type of assets do Commodity Linked Debentures (CLDs) typically link their returns to?

Precious metals like Gold and Silver. Signup and view all the answers

What is the principal mechanism through which Equity Linked Debentures (ELDs) provide capital protection?

Combining fixed income securities with equity options. Signup and view all the answers

In which currency is the repayment of principal for Foreign Currency Convertible Bonds (FCCBs) made?

In foreign currency. Signup and view all the answers

Which regulatory act governs Foreign Currency Convertible Bonds (FCCBs) in India?

Foreign Exchange Management Act (FEMA). Signup and view all the answers

What defines the underlying asset structure of Commodity Linked Debentures (CLDs)?

Performance of the underlying commodity asset. Signup and view all the answers

What is the minimum passing score required to successfully complete the examination?

60 marks Signup and view all the answers

Which approach focuses on analyzing overall economic trends before examining individual companies?

Top-down approach Signup and view all the answers

What is the penalty for each wrong answer in the examination?

25% of the question's marks Signup and view all the answers

What is one of the key dimensions to be considered in company analysis?

Qualitative and quantitative dimensions Signup and view all the answers

How many multiple choice questions are included in the assessment structure?

92 questions Signup and view all the answers

Which of the following best describes macroeconomic analysis?

Assessment of broader economic factors and indicators Signup and view all the answers

What type of software are candidates advised to be proficient in for the examination?

Microsoft Excel and OpenOffice Calc Signup and view all the answers

What is the total mark allocation for the examination?

100 marks Signup and view all the answers

Who issues Participatory Notes (P-Notes) to overseas investors?

Foreign portfolio investors Signup and view all the answers

What is the primary objective of insurance companies?

To ensure assets Signup and view all the answers

What is the main advantage of diversification in Mutual Funds investing?

Reducing risk in investment Signup and view all the answers

Who is responsible for investment decisions in Insurance companies?

Designated people Signup and view all the answers

What is the primary role of a Research Analyst?

To understand and evaluate the growth of industries and companies Signup and view all the answers

What is the role of a fund manager in Mutual Funds?

To take major investment decisions Signup and view all the answers

What do Research Analysts need to understand while evaluating industries?

The regulatory environment, business models, competition, operating factors, and consumers’ behaviour Signup and view all the answers

What is an important aspect that Research Analysts focus on while understanding the economy?

Changes in various macro-economic factors, including national income, inflation rate, interest rate, and unemployment rate Signup and view all the answers

Who must register with SEBI to participate in the Indian Securities Market?

International investors Signup and view all the answers

Why is it important for Research Analysts to understand the economy?

Because growth depends on the economic environment Signup and view all the answers

What do Mutual Funds companies invest in?

Stocks, bonds, and other securities Signup and view all the answers

Who believed that governments could change economic performance by adjusting tax rates and government spending?

John Maynard Keynes Signup and view all the answers

What do investors in Mutual Funds own?

Units, which represent a portion of the holdings of the fund Signup and view all the answers

What is the role of Research Analysts in evaluating companies?

To evaluate the company's past performance and make recommendations Signup and view all the answers

What do Research Analysts explore while understanding industries, companies, and/or economies?

Various aspects of industries, companies, and economies Signup and view all the answers

What is the significance of global factors in understanding the economy?

They have a significant impact on GDP growth based on export and import transactions Signup and view all the answers

What is the primary role of Buy-side Analysts?

They generate investment recommendations for their own internal use within their organizations, like asset managers. Signup and view all the answers

Which of the following are NOT a type of client for Independent Research Analysts?

Asset Managers Signup and view all the answers

What is the key difference between the research reports produced by Buy-side Analysts and Independent Research Analysts?

Independent Research Analysts' reports are generally available to the public, while Buy-side analysts' reports are only for internal use. Signup and view all the answers

What is a potential benefit of using an Independent Research Analyst's report over an analyst working for an investment bank?

All of the above Signup and view all the answers

Which of these groups would likely benefit the most from utilizing the research of an Independent Research Analyst?

A hedge fund manager looking to generate alpha in a specific market. Signup and view all the answers

What is a possible drawback of relying solely on research from Buy-side Analysts?

All of the above Signup and view all the answers

Why might a media outlet choose to publish research from an Independent Research Analyst?

All of the above Signup and view all the answers

Which type of research analyst would likely be most valuable to a regulator investigating potential market manipulation?

Independent Research Analysts, as they are not tied to any specific company or investment bank. Signup and view all the answers

What is the outcome for employees when the company's share price rises above the exercise price of an option?

They gain financially from exercising their options. Signup and view all the answers

What is the primary role of the secondary market in securities?

To provide liquidity to existing securities. Signup and view all the answers

Which statement accurately describes the Over-The-Counter (OTC) market?

Trades are directly negotiated between counterparties. Signup and view all the answers

What is a characteristic of Exchange Traded Markets?

Securities transactions are settled through a clearing corporation. Signup and view all the answers

How do secondary markets support the growth of primary markets?

By giving investors assurance to liquidate their investments. Signup and view all the answers

What is the function of trading in financial markets?

To provide a formal method for buying and selling existing securities. Signup and view all the answers

What distinguishes the primary market from the secondary market?

In the primary market, issuers interact directly with investors. Signup and view all the answers

What is a significant feature of stock exchanges in India?

They utilize an electronic order-matching system for efficient trading. Signup and view all the answers

What is the main reason that hedge funds are considered a misnomer?

They often invest in assets that are not hedged. Signup and view all the answers

Which of the following is NOT considered an alternative investment asset?

Fixed deposits Signup and view all the answers

Which category of Alternative Investment Funds (AIFs) in India uses complex investment strategies and may utilize leverage and derivatives?

Category III AIF Signup and view all the answers

What is a defining characteristic of Category I AIFs in India?

Focus on socially or economically desirable sectors. Signup and view all the answers

Which of the following is NOT typically considered a Category I AIF?

Hedge funds Signup and view all the answers

What is the main purpose of the Securities and Exchange Board of India (SEBI) (Alternative Investment Funds) Regulations, 2012?

To define and regulate the operation of Alternative Investment Funds (AIFs) in India. Signup and view all the answers

What is the primary objective of alternative investment funds?

To generate high returns for investors by taking on higher risks. Signup and view all the answers

What does the text suggest is the key difference between alternative investment funds (AIFs) and traditional investment schemes like mutual funds?

AIFs are not subject to the same level of regulation as mutual funds. Signup and view all the answers

What is the main purpose of securities markets?

To provide channels for conversion of savings into investments Signup and view all the answers

Who are the providers of funds in the financial market?

Investors/Providers of funds Signup and view all the answers

What is included in the definition of 'securities' under the Securities Contracts (Regulation) Act, 1956?

Shares, scrips, stocks, bonds, debentures, and debenture stock Signup and view all the answers

What is the role of regulatory bodies in the financial market?

To ensure the orderly development of the market Signup and view all the answers

What is the primary function of intermediaries in the financial market?

To facilitate the transfer of funds and securities Signup and view all the answers

What is the term used to describe the broader universe of savers with surplus to invest?

Providers of funds Signup and view all the answers

What are the two types of entities that participate in the financial market?

Borrowers and providers of funds Signup and view all the answers

What is a preferential issue?

An issue of specified securities to a select person or group of persons on a private placement basis Signup and view all the answers

What happens to savings through the securities market?

They are converted into investments Signup and view all the answers

What is the primary requirement for a company to issue bonus shares?

The company must have sufficient amount of retained earnings Signup and view all the answers

What happens to the amount equivalent to the value of shares issued in a bonus issue?

It is transferred from retained earnings to share capital Signup and view all the answers

What are the options available to an investor who has been awarded rights shares?

Exercise the right, transfer the right to another investor, or let the rights lapse Signup and view all the answers

What is a requirement for a privately placed security to be listed on a stock exchange?

The security must meet the listing requirements of SEBI and the stock exchange Signup and view all the answers

What is the key difference between rights and bonus shares?

Rights shares are issued at a specific price, while bonus shares are issued without any consideration Signup and view all the answers

What is the purpose of SEBI regulations with respect to preferential issues?

To ensure that the company complies with the pricing, disclosure, lock-in, and other requirements Signup and view all the answers

Can a company issue securities through a private placement even if it has not made a public offer of shares?

Yes, the company can issue securities through a private placement Signup and view all the answers

What is the reason that NISM and SEBI do not assume responsibility for actions taken based on the publication's information?

The information provided may not consider individual circumstances. Signup and view all the answers

How should readers approach the recommendations made in the publication?

They should consider seeking professional advice before acting. Signup and view all the answers

What type of material does this publication NOT guarantee to provide?

Expert recommendations tailored to individuals. Signup and view all the answers

Why may the content in the publication not be fully reliable?

The publishers do not guarantee accuracy or completeness. Signup and view all the answers

What is explicitly stated about the views expressed by the authors or publishers?

They may not address specific individual needs. Signup and view all the answers

What is one reason provided for the potential errors or omissions in the publication?

Working knowledge in relevant fields is still developing. Signup and view all the answers

What is the implication of the disclaimer regarding the recommendations made in the publication?

They do not substitute for professional advice. Signup and view all the answers

What aspect of this publication is highlighted by the disclaimer?

It does not consider varied reader needs and objectives. Signup and view all the answers

What is a primary responsibility of a Research Analyst?

Analyzing financial reports and market trends Signup and view all the answers

Which aspect is NOT considered an important quality of a Research Analyst?

Charismatic public speaking Signup and view all the answers

What role does economic analysis play in fundamental analysis?

It identifies macroeconomic trends affecting investments. Signup and view all the answers

Which of the following transactions is a characteristic of the securities market?

Buying and selling shares or bonds Signup and view all the answers

In the context of industry analysis, which term refers to ongoing shifts or movements in the market over time?

Secular trends Signup and view all the answers

What is the focus of a SWOT analysis in company analysis?

Strengths, weaknesses, opportunities, and threats Signup and view all the answers

What does dematerialization in the securities market refer to?

The conversion of physical securities into electronic form Signup and view all the answers

In the context of financial analysis, what is the primary objective of fundamental analysis?

To determine a company's asset value based on earnings and revenue Signup and view all the answers

Which of the following is NOT a common source of information for economic analysis?

Opinion polls conducted by private citizens Signup and view all the answers

What does the role of industry analysis imply in the context of understanding market dynamics?

Analyzing the competitive landscape of the entire industry sector Signup and view all the answers

What is the primary purpose of a rights issue?

To allow existing shareholders to purchase additional shares at a discount Signup and view all the answers

Which valuation approach focuses on analyzing future cash flows to determine the current value of a business?

Discounted Cash Flows Model Signup and view all the answers

What is a common risk associated with investments that are influenced by market sentiment?

Market risk Signup and view all the answers

Which corporate action involves converting existing shares into a lesser number of shares, thereby increasing the nominal value per share?

Share Consolidation Signup and view all the answers

Which of the following is a method used to mitigate investment risks by analyzing potential exposure to market movements?

Sensitivity Analysis Signup and view all the answers

What does the term 'margin of safety' refer to in the context of investments?

The buffer between intrinsic value and market price Signup and view all the answers

Which valuation matrix emphasizes earnings as the primary metric for evaluating a company's performance?

Earnings Based Valuation Matrices Signup and view all the answers

What is the main benefit of a buyback of shares for a company?

To boost the stock price by reducing the supply of shares Signup and view all the answers

Which of the following options would most likely indicate potential legal issues or financial distress in a company?

Frequent changes in management Signup and view all the answers

Which of the following corporate actions allows shareholders to receive additional shares instead of cash dividends?

Bonus Issue Signup and view all the answers

Study Notes

Role of Research Analysts

Research analysts collect data/information from different reliable sources, interpret the data/information, and convert it into recommendations that their clients can use.
Research analysts must follow all the rules and regulations as specified by SEBI both in words and spirit.
Research analysts are expected to perform their role with utmost sincerity, honesty, and ethics without any bias.

Important Qualities of a Research Analyst

The job of research analysts requires quantitative and qualitative skills.

Debentures/Bonds/Notes

Debentures/Bonds/Notes are instruments for raising long-term debt.
Debentures are either unsecured or secured (backed by collateral support) in nature.
There are various types of debentures/bonds such as fully convertible, non-convertible, and partly convertible debentures.
Fully convertible debentures are fully convertible into ordinary shares of the issuing company.
Partly convertible debentures (PCDs) are partly convertible into ordinary shares of the issuing company.
Non-Convertible Debentures (NCDs) are pure debt instruments without a feature of conversion.

Foreign Currency Bonds

Foreign currency bonds are bonds issued by a company in a currency that is different from the currency of its home country.

Securities Market

Securities are transferrable financial instruments or contracts that show evidence of indebtedness or ownership interest in assets of an incorporated entity.
Securities market brings together a large number of buyers and sellers and thus creates liquidity.
Securities market allows investors and sellers to buy and sell securities at close to market prices.

Types of Research Analysts

Sell-side Analysts: They work for firms that provide investment banking, broking, advisory services for clients.
Buy-side Analysts: They work for Asset managers like mutual funds, hedge funds, pension funds, Alternative investment funds, Foreign Portfolio investors or portfolio managers.
Independent Research Analysts: They work for research originators or boutique firms separate from full-service investment firms and sell their research to others on a subscription basis.

Intermediaries in the Securities Market

Investment Bankers: They evaluate the capital needs of issuers, structure an appropriate instrument, get involved in pricing the instrument and manage the entire issue process until the securities are issued and listed on a stock exchange.
Underwriters: They undertake to subscribe any portion of a public offer of securities which may not be bought by investors.

Institutional Participants

Institutional Investors comprise domestic financial institutions, Banks, Insurance Companies, Mutual Funds, and Foreign Portfolio Investors.
Foreign Portfolio Investors (FPIs): A Foreign Portfolio investor (FPI) is an entity established or incorporated outside India that proposes to make investments in India.### Commodities
Commodities are interchangeable goods of the same type, e.g., a bar of gold is a commodity, but a piece of jewelry made of gold is not.
Commodities can be hard (natural resources, metals, crude oil) or soft (agricultural products, grains, pulses).
Investing in commodities can help protect the real value of an investment since inflation and commodity prices are directly related.

Precious Metals

Precious metals like gold and silver are viewed as investments that can help preserve the real value of money.
They have a long lifespan, and their storage cost is very small compared to their value.

Commodity ETFs

Commodity ETFs (Exchange-Traded Funds) invest in a range of physical commodities.
Investors can invest in commodity ETFs by buying units of the fund.
The value of the units moves in line with the net asset value of the fund, which is influenced by commodity prices.
Storage is handled by the fund, so investors do not have storage obligations.

External Bonds/Masala Bonds

External bonds are bonds issued in a currency different from the currency of the country where they are issued.
Masala bonds are external bonds denominated in Indian Rupees (INR) and issued outside of India.
Masala bonds shift the currency risk from the issuer to the investor.

Securities Market

Securities are transferrable financial instruments or contracts that show evidence of indebtedness or ownership interest in assets of an incorporated entity.
Securities include equity shares, preference shares, debentures, bonds, and other such instruments.
Securities are issued by companies, financial institutions, or the government and purchased by investors.

Functions of Securities Market

Securities market allows issuers to raise money at a cost and provides investors with an opportunity to convert their savings into financial assets.
Securities market brings together a large number of buyers and sellers, creating liquidity and making it easy to buy and sell securities at close to market prices.

Market Participants

Market participants in the securities market include buyers, sellers, and intermediaries such as stock exchanges, depositories, and depository participants.
Stock exchanges provide a trading platform for buyers and sellers to transact in already issued securities.
Depositories hold securities of investors in electronic form and provide services related to transactions in dematerialized form.

Debentures/Bonds/Notes

Debentures/Bonds/Notes are instruments for raising long-term debt.
Debentures can be fully convertible, non-convertible, or partly convertible into ordinary shares of the issuing company.
Non-Convertible Debentures (NCDs) are pure debt instruments without a conversion feature and are repayable/redeemable on maturity.

Research Analyst Profession

Research analysts help clients take investment decisions by analyzing data and information.
Primary responsibilities of a research analyst include collecting information, analyzing data, and providing recommendations to clients.
Important qualities desired in a research analyst include the ability to read and understand financial statements, clarity in financial concepts, and the ability to communicate complex ideas effectively.

Primary Market

Primary market is used by companies to raise fresh capital from investors.
Primary market offerings may be public offerings or private placements to a select group of investors.
Public issues involve issuing securities to the members of the public, while private placements involve issuing securities to a select group of investors.### Chapter 1: Introduction to Research Analyst Profession

1.1 Primary Role of a Research Analyst

The primary role of a research analyst is to help clients take investment decisions
The process of selection involves:
- Short-listing options
- Comparing technical specifications
- Prioritizing important factors
- Making an informed decision
Research analysts follow a similar process to provide recommendations to clients

Chapter 2: Introduction to Securities Market

2.3.2 Secondary Market

The secondary market provides liquidity to securities
It promotes the growth of the primary market and capital formation
The secondary market can be divided into:
- Over-The-Counter (OTC) Market
- Exchange Traded Markets
Trading in securities can be done in either the OTC market or the Exchange Traded Market

Chapter 9: Corporate Actions

9.1 Philosophy of Corporate Actions

Corporate actions include:
- Dividend
- Rights Issue
- Bonus Issue
- Stock Split
- Share Consolidation
- Merger and Acquisition
- Demerger / Spin-off
- Scheme of arrangement
- Loan Restructuring
- Buyback of Shares
- Delisting and relisting of Shares
- Share Swap

Chapter 10: Valuation Principles

10.1 Difference between Price and Value

Valuation principles include:
- Discounted Cash Flows Model for Business Valuation
- Relative valuation
- Earnings Based Valuation Matrices
- Assets based Valuation Matrices
- Relative Valuations - Trading and Transaction Multiples
- Sum-Of-The-Parts (SOTP) Valuation
- Other Valuation Parameters in New Age Economy and Businesses
- Capital Asset Pricing Model
- Objectivity of Valuations

Chapter 11: Fundamentals of Risk and Return

11.1 Concept of Return of Investment and Return on Investment

Fundamentals of risk and return include:
- Calculation of Simple, Annualized and Compounded Returns
- Risks in Investments
- Measuring risk
- Concepts of Market Risk (Beta)
- Sensitivity Analysis to Assumptions
- Concept of Margin of Safety
- Comparison of Equity Returns with Bond Returns
- Calculating risk adjusted returns
- Basic Behavioral Biases Influencing Investments

Chapter 12: Qualities of a Good Research Report

12.1 Qualities of a Good Research Report

Qualities of a good research report include:
- A checklist-based approach
- A sample checklist for investment research reports

Chapter 13: Legal and Regulatory Environment

13.1 Regulatory infrastructure in Financial Markets

Legal and regulatory environment includes:
- Important regulations in Indian Securities Market
- Code of Conduct for Research Analysts
- Management of Conflicts of Interest and Disclosure Requirements for Research Analysts
- Exchange surveillance mechanisms: GSM and ASM

NISM-Series-XV: Research Analyst Certification Examination

This workbook is designed to assist candidates in preparing for the National Institute of Securities Markets (NISM) Certification Examination for Research Analyst.

About NISM

NISM is a leading provider of high-end professional education, certifications, training, and research in financial markets.
NISM engages in capacity building among stakeholders in the securities markets through professional education, financial literacy, enhancing governance standards, and fostering policy research.
NISM works closely with all financial sector regulators in the area of financial education.

NISM Certification Programs

NISM Certification programs aim to enhance the quality and standards of professionals employed in various segments of the financial services sector.
NISM’s School for Certification of Intermediaries (SCI) develops and conducts certification examinations and Continuing Professional Education (CPE) programs that aim to ensure that professionals meet the defined minimum common knowledge benchmark for various critical market functions.

Workbook Content

The workbook covers all important topics required to undertake research on companies, including:
- Basics of Indian securities markets
- Various terminologies used in the equity and debt markets
- Top-down and bottom-up approach to fundamental research
- Basic principles for micro and macro-economic analysis and key industry drivers
- Qualitative and quantitative dimensions with respect to company analysis
- Fundamentals of risk and return
- Valuation principles
- Corporate actions and the regulatory environment
- Essential aspects of writing a good research report

Disclaimer

The contents of this publication do not necessarily constitute or imply its endorsement, recommendation, or favoring by the National Institute of Securities Markets (NISM) or the Securities and Exchange Board of India (SEBI).
This publication is meant for general reading and educational purposes only and is not meant to serve as a guide for investment.

Commodities

Commodities are largely traded goods that are meant for use in production of goods or for consumption.
Inflation and prices of commodities are directly related, and investing in commodities can help protect the real value of investment.
Hard commodities are natural resources that are mined or extracted, such as metals and crude oil.
Soft commodities refer to commodities that are grown, such as agricultural products like grains and pulses.
Precious metals like gold and silver are viewed as an investment that can help preserve the real value of money.
Commodity ETF is an exchange-traded fund that invests in a range of physical commodities.

Primary Market

Primary market is used by companies (issuers) for raising fresh capital from investors.
Primary market offerings may be a public offering or an offer to a select group of investors in a private placement program.
The shares offered may be new shares issued by the company, or it may be an offer for sale, where an existing large investor/investors or promoters offer a portion of their holding to the public.
Public issue: Securities are issued to the members of the public, and anyone eligible to invest can participate in the issue.
Initial Public Offer (IPO): An initial public offer of shares or IPO is the first sale of a corporate’s common shares to investors at large.
Eligibility criteria for raising capital from public investors are defined by SEBI in its regulations and include minimum requirements for net tangible assets, profitability, and net-worth.

Introduction to Research Analyst Profession

The primary role of a research analyst is to provide insightful and actionable research to clients
Key responsibilities of a research analyst include:
- Interacting with companies/clients to gather information
- Analyzing data and making recommendations
- Communicating research findings to clients
Important qualities of a research analyst include:
- Strong analytical and communication skills
- Ability to work independently and think critically
- Strong understanding of the securities market and instruments

Introduction to Securities Market

A security is a financial instrument that represents an ownership or debt position
Types of securities include stocks, bonds, and derivatives
The securities market provides a platform for companies to raise capital and for investors to buy and sell securities
Key market participants include:
- Investors (individual and institutional)
- Brokers and dealers
- Exchanges (e.g. stock exchanges, commodity exchanges)
- Regulators (e.g. SEBI in India)

Terminology in Equity and Debt Markets

Equity market terminology includes:
- Stocks/shares
- IPOs (Initial Public Offerings)
- Dividend yield
- Earnings per share (EPS)
Debt market terminology includes:
- Bonds
- Coupon rate
- Yield to maturity
- Credit rating

Fundamentals of Research

Investing involves buying and holding securities with the expectation of earning returns
Research plays a critical role in investment decisions by providing insights into the security's potential
Types of research include:
- Technical analysis (charts and patterns)
- Fundamental analysis (financial statements, industry trends)
- Quantitative research (statistical models and algorithms)
- Behavioral approach to equity investing (psychological and emotional factors)

Economic Analysis

Microeconomics studies individual economic units (e.g. households, firms)
Macroeconomics studies the economy as a whole (e.g. GDP, inflation)
Key macroeconomic variables include:
- GDP and its components
- Inflation and deflation
- Unemployment rate
- Interest rates
Economic analysis is essential for fundamental analysis and investment decisions

Industry Analysis

Industry analysis involves studying the industry in which a company operates
Key aspects of industry analysis include:
- Understanding industry cyclicality
- Market sizing and trend analysis
- Secular trends, value migration, and business life cycle
- Key industry drivers and KPIs
- Regulatory environment and taxation

Company Analysis – Business and Governance

Company analysis involves studying the company's business and governance
Key aspects of company analysis include:
- Understanding business and business models
- Pricing power and sustainability
- Competitive advantages and points of differentiation
- Strengths, weaknesses, opportunities, and threats (SWOT) analysis
- Quality of management and governance structure

Company Analysis – Financial Analysis

Financial analysis involves studying the company's financial statements and performance
Key aspects of financial analysis include:
- Qualitative understanding of the company's financials
- Quantitative analysis of financial statements (e.g. income statement, balance sheet)
- Ratio analysis and financial metrics (e.g. ROE, ROCE)
- Cash flow analysis and financial modeling

Corporate Actions

Corporate actions include:
- Dividend declarations
- Rights issues
- Bonus issues
- Stock splits
- Mergers and acquisitions
- Demergers and spin-offs
- Scheme of arrangement
- Loan restructuring
- Buyback of shares
- Delisting and relisting of shares
- Share swap

Valuation Principles

Valuation involves estimating the intrinsic value of a security
Key approaches to valuation include:
- Discounted cash flow (DCF) model
- Relative valuation (e.g. price-to-earnings ratio)
- Earnings-based valuation matrices
- Assets-based valuation matrices
- Sum-of-the-parts (SOTP) valuation
- Capital asset pricing model (CAPM)

Fundamentals of Risk and Return

Return on investment (ROI) and return on equity (ROE) are important metrics
Risk is an essential concept in investing, and can be measured using metrics such as beta
Key concepts in risk and return include:
- Market risk (beta)
- Sensitivity analysis
- Margin of safety
- Risk-adjusted returns
- Behavioral biases in investing

Qualities of a Good Research Report

A good research report should have:
- Clear and concise writing
- Well-structured and logical flow
- Relevant data and analysis
- Objective and unbiased tone
- Proper disclosure of conflicts of interest

Legal and Regulatory Environment

The regulatory infrastructure in financial markets is essential for maintaining fair and efficient markets
Key regulations in Indian securities market include:
- SEBI Act and rules
- Securities Contracts (Regulation) Act
- Companies Act
Research analysts must comply with code of conduct and disclosure requirements

Examination Objectives

Know the basics of Indian securities markets and different terminologies used in equity and debt markets
Know the top-down and bottom-up approach to fundamental research
Know the basic principles for micro and macro-economic analysis
Know the key industry drivers and sources of information for industry analysis
Understand qualitative and quantitative dimensions with regards to company analysis
Know the fundamentals of risk and return, valuation principles, and the philosophy of various corporate actions
Understand the qualities of a good research report

Assessment Structure

The examination consists of 92 multiple-choice questions of 1-mark each and 2 case-based questions (each case having 4 questions of 1-mark each), adding to a total of 100 marks
The examination should be completed in 2 hours
The passing score for the examination is 60 marks (i.e., 60%)
There shall be negative marking of 25% of the marks assigned to the question for each wrong answer

Important

Test Centre workstations are equipped with either Microsoft Excel or OpenOffice Calc
Candidates are advised to be well-versed with both software for computation of numericals

Foreign Currency Convertible Bonds (FCCBs)

FCCBs are instruments that are generally optionally convertible and issued offshore in different denominations under guidelines defined by the Reserve Bank of India (RBI)
The payment of interest and repayment of principal (if happens) on these bonds is in foreign currency
However, once conversion of the instrument happens in equity, dividend is paid in Indian Rupees with conversion obligation (currency risk) lying with the investors
FCCBs are regulated by RBI notifications under the Foreign Exchange Management Act (FEMA)
The Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism), 1993 lays down the guidelines for such issues

Equity Linked Debentures (ELDs)

ELDs are floating rate debt instruments whose interest is based on the returns of the underlying equity asset such as Nifty 50, S&P Sensex, individual stocks, or any customized basket of individual stocks
The issuer of the bond invests a pre-determined part of the principal amount collected in fixed-income securities like bonds, which provide principal protection while the balance is used to buy options that provide the exposure to returns of equity
These instruments are generally structured in a way to give full capital protection with a provision for equity participation to the investors
Capital protection should not be read as non-existence of credit risk (risk of default by issuer)
These instruments still carry credit risk and accordingly rated by credit rating agencies

Commodity Linked Debentures (CLDs)

CLDs are floating rate debt instruments whose interest is based on the returns of the underlying commodity asset
While the returns can be linked to any commodity, most of these papers globally are linked to precious metals – Gold and Silver

Clearing and Settlement

Clearing and settlement are post-trading activities that constitute the core part of equity trade life cycle
Clearing activity is all about ascertaining the net obligations of buyers and sellers for a specific time period
Settlement is the next step of settling obligations by delivering shares (by the seller) and paying money (by the buyer)
Clearing corporation provides full novation of contracts between buyers and sellers, which means it acts as buyer to every seller and seller to every buyer
As a result, the counterparty risk is substantially reduced for the investors
Risk Management: In OTC transactions, counterparties are expected to take care of the credit risk on their own
In exchange-traded world, the clearing corporation, as defined above, gives settlement guarantee of trades to the counterparties (all buyers and sellers)
This exposes the clearing corporation to the risk of default by the buyers and sellers
To handle this risk, the clearing corporation charges various kinds of margins, most prominent among these margins are Initial or upfront margin, Peak Margin, and mark-to-market (MTM) margins
Initial margin is a percentage of transaction value arrived at based on the concept of “Value At Risk” philosophy
MTM margin is the notional loss which an outstanding trade has suffered during a specified period on account of price movements

Market Participants and Their Activities

Market participants in securities markets include buyers, sellers, and various intermediaries between the buyers and sellers
Market intermediaries:
- Stock Exchanges: Provide a trading platform where buyers and sellers can transact in already issued securities
- Depositories: Hold securities (like shares, debentures, bonds, government securities, mutual fund units) of investors in electronic form
- Depository Participant: An agent of the depository through which it interfaces with the investors and provides depository services
- Custodians: Entities that are charged with the responsibility of holding funds and securities of its large clients, typically institutions such as banks, insurance companies, and foreign portfolio investors
- Clearing Corporation: Ensures that members on the Stock Exchange meet their obligations to deliver funds or securities
- Clearing Banks: Act as an important intermediary between clearing members and the clearing corporation
- Merchant Bankers: Entities registered with SEBI and act as issue managers, investment bankers, or lead managers

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Prepare for the NISM Certification Examination for Research Analyst with this workbook. It assists candidates in understanding the exam content and helps them prepare.