📊 NISM Series XXI-A Chapter 2 of 12 ⚖ 5 of 100 marks weightage

Ch.2: Introduction to Securities Markets

Practice questions for NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination, Chapter 2: Introduction to Securities Markets. This chapter explains how the securities market channels household savings into business capital, starting with the legal meaning of 'securities' under the SCRA. It then separates the primary market (fresh issues: IPO, FPO, rights, private placement, preferential, QIP, bonus, OFS) from the secondary market (OTC vs exchange trading, clearing, settlement and margins). Finally it maps the market participants: infrastructure institutions, intermediaries, institutional investors and retail investors. Carries 5 out of 100 marks. The exam has 100 MCQs, 60% passing score, and −10% negative marking per wrong answer.

What You Will Learn in This Chapter

How the securities market moves capital from savers to businesses and what Section 2(h) of the Securities Contracts (Regulation) Act, 1956 includes and excludes as 'securities'.
The difference between the primary and secondary markets, and why a liquid secondary market supports fresh capital raising.
The main primary-market routes (IPO, FPO, rights, private placement, preferential issue, QIP, bonus issue and OFS) and which of them raise fresh capital.
How exchange trades are cleared and settled, what novation by the clearing corporation means, and how initial and MTM margins manage default risk.
The roles of exchanges, clearing corporations, depositories, DPs, brokers, APs, custodians, clearing banks and merchant bankers, and the main institutional and retail investor groups.

Key Terms:Securities (SCRA Sec 2(h))Primary vs secondary marketOffer for Sale (OFS)Qualified Institutions Placement (QIP)Bonus issueNovationMark-to-market (MTM) marginDepository Participant (DP)Authorised Person (AP)Retail individual investor

Free Sample Question

Q1MCQMediumSecondary market and primary market

Why does an active secondary market support the growth of the primary market?

AIssuers can raise capital without any disclosures

BSecondary trades add to the issuer's share capital

✓Primary investors know they can exit when they need to

DPrices in the secondary market are fixed by SEBI

💡 An active secondary market assures primary market investors of a continuous market to liquidate their investments, which promotes capital formation.

39 more questions in this chapter

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About this content: These practice questions are written by BullWiser from the syllabus of the NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination, using the workbook published by the National Institute of Securities Markets (NISM), Mumbai (September 2025 edition) as the fact source. NISM is a SEBI-established institution. Questions cover Chapter 2: Introduction to Securities Markets with verified answers and explanations. BullWiser is an independent exam preparation platform — not affiliated with NISM, SEBI or APMI. Last updated: September 30, 2026.

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