📊 NISM Series XXI-A Chapter 3 of 12 ⚖ 10 of 100 marks weightage

Ch.3: Investing in Stocks

Practice questions for NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination, Chapter 3: Investing in Stocks. This chapter treats equity as an asset class: why it offers higher return with higher risk, which of its risks can be diversified away, and how analysts research and pick stocks through the top-down EIC framework. It then covers the three main routes to intrinsic value (DCF models, asset-based valuation and relative multiples such as P/E, P/BV, P/S, PEG and EV/EBITDA) and closes with the assumptions of technical analysis and how it differs from fundamental analysis. Carries 10 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

Why equity is a residual, ownership-based claim that carries more risk and more upside than debt.
Which equity risks are systematic (market risk, measured by beta) and which are unsystematic (sector and company risk) and can be diversified away.
How fundamental analysis uses the top-down EIC framework, or a bottom-up approach, to compare intrinsic value with market price.
How the DDM (Gordon Growth), FCFF and FCFE models and the relative multiples P/E, P/BV, P/S, PEG and EV/EBITDA are used to value a stock.
The assumptions behind technical analysis, the role of support, resistance, volume and moving averages, and how it contrasts with fundamental analysis.

Key Terms:Residual claimBetaUnsystematic (idiosyncratic) riskEIC frameworkIntrinsic valueGordon Growth ModelFCFF vs FCFEPEG ratioEV/EBITDASupport and resistance

Free Sample Question

Q1MCQMediumEquity vs debt return potential

Priya wants an investment where her upside is linked to the success of the business rather than capped at a fixed payment. Which feature of equity matches this need?

ACapital is protected in the event of liquidation

BDividends are guaranteed irrespective of profits

CReturns are fixed in advance at the time of investment

✓Unlimited profit potential tied to company performance

💡 Unlike debt investors who receive fixed interest, equity investors are part-owners with unlimited profit potential depending on company performance.

79 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 3: Investing in Stocks 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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← Ch.2: Introduction to Securities Markets Ch.4: Investing in Fixed Income Securities →