1. Initial Public Offering (IPO) and Follow-on Public Offering (FPO) are functions of the:
Money Market
Secondary Market
Primary Market
Derivatives Market
Explanation:
The Primary Market is where new securities are issued for the first time (New Issue Market). IPOs (first sale) and FPOs (subsequent sale by existing companies) allow companies to raise fresh capital directly from investors.
2. Which of the following instruments is regulated by SEBI?
Bank Fixed Deposits
Government Securities (G-Secs)
Corporate Bonds and Debentures
Currency Notes
Explanation:
SEBI regulates the securities market, which includes corporate bonds, shares, and mutual funds. G-Secs are primarily regulated by RBI. Currency is RBI's domain. Bank FDs are regulated by RBI.
3. The primary function of NSDL (National Securities Depository Limited) and CDSL is to:
Fix stock prices.
Regulate mutual funds.
Hold securities in electronic (demat) form.
Issue shares to the public.
Explanation:
NSDL and CDSL are Depositories. They hold securities (shares, debentures) in electronic form to facilitate paperless trading and settlement.
4. What is the "Green Shoe Option" in an IPO?
Option to cancel the IPO.
Option for underwriters to sell additional shares to stabilize the price.
Option for investors to buy shares at a discount.
Option to sell shares back to the company.
Explanation:
A Green Shoe Option (Over-allotment Option) allows the issuer to authorize underwriters to sell additional shares (usually up to 15%) if demand is high, helping to stabilize the post-listing price.
5. In the context of IPO applications, what does "ASBA" stand for?
Application System for Bank Allotment
Application Supported by Blocked Amount
Account Settlement by Authority
Allotment Supported by Bank Account
Explanation:
ASBA is a process where the IPO application money remains blocked in the investor's bank account and is debited only if shares are allotted.
6. India currently follows which settlement cycle for equity spot markets (as initiated in phases from 2023)?
T+2 Settlement
T+0 (Instant) only
T+1 Settlement
T+3 Settlement
Explanation:
India moved from T+2 to T+1 settlement cycle (Trade date + 1 day) for equities, making it one of the fastest settlement systems globally. SEBI is also testing optional T+0.
7. Funds raised through "Green Bonds" must be utilized exclusively for:
Projects with positive environmental or climate benefits.
Payment of dividends to shareholders.
Expansion of oil refineries.
Repaying old corporate debt.
Explanation:
Green Bonds are debt instruments specifically earmarked to raise money for climate and environmental projects like renewable energy, clean transportation, and water management.
8. Regarding Sovereign Gold Bonds (SGBs), which of the following statements about taxation is correct?
Capital gains arising on redemption are tax-free for individual investors.
TDS is applicable on interest.
Interest earned is tax-free.
Both Interest and Capital gains are taxable.
Explanation:
For SGBs, the interest (2.5% p.a.) is taxable. However, capital gains arising on redemption of the bond (held till maturity) are exempt from tax for individual investors. No TDS is deducted on interest.
9. In the "Book Building" process of an IPO, the "Cut-off Price" refers to:
The highest price in the price band.
The floor price plus 20%.
The specific price at which the issue is decided to be sold after analyzing demand.
The lowest price at which shares are allotted.
Explanation:
The Cut-off Price is finalized by the issuer in consultation with the Merchant Bankers based on the bids received. Investors bidding at the "Cut-off" agree to pay whatever final price is discovered.
10. Companies listed on the "SME Exchange" platform are required to migrate to the Main Board if their paid-up capital exceeds:
?25 Crore
?10 Crore
?100 Crore
?50 Crore
Explanation:
SME Platform listing is for companies with post-issue paid-up capital up to ?25 Crore. If it exceeds this limit, they must migrate to the Main Board.
11. In the context of Primary Market issues (IPOs), what does the "ASBA" mechanism ensure?
The application money remains in the investor's bank account but is blocked until allotment.
Investors get guaranteed allotment of shares.
The issuer company gets the money immediately upon application.
Investors can apply for shares without a bank account.
Explanation:
Application Supported by Blocked Amount (ASBA) ensures that funds are debited from the investor's account only when shares are actually allotted, allowing them to earn interest on the blocked amount in the interim.
12. The "Green Shoe Option" allows a stabilizing agent to over-allot shares up to what percentage of the issue size?
Explanation:
SEBI guidelines allow the Green Shoe Option (price stabilization mechanism) to be exercised for up to 15% of the total issue size.
13. A "Rights Issue" is an offer of shares to:
Existing shareholders of the company.
Employees of the company.
The general public.
Foreign Institutional Investors (FIIs) only.
Explanation:
A Rights Issue gives existing shareholders the "right" (but not obligation) to buy new shares in proportion to their existing holdings, usually at a discount to the market price.
14. Since January 2016, SEBI has made the ASBA (Application Supported by Blocked Amount) facility mandatory for:
All investor categories applying in public issues (IPOs/FPOs)
Only High Net Worth Individuals (HNIs)
Only Qualified Institutional Buyers (QIBs)
Only Retail Investors in IPOs
Explanation:
SEBI mandated that all categories of investors (Retail, HNI, QIB) must strictly apply through the ASBA mechanism to improve efficiency and reduce refunds.
15. "Qualified Institutional Placement" (QIP) is a mechanism available only to:
Government companies for disinvestment.
Startups to raise seed funding.
Listed companies to raise equity/debt from Qualified Institutional Buyers (QIBs).
Unlisted companies to raise debt.
Explanation:
QIP allows listed companies to raise capital quickly from institutional investors without the lengthy regulatory process of a standard public issue.
16. An "Anchor Investor" in an IPO is a Qualified Institutional Buyer (QIB) who:
Underwrites the entire issue.
Invests a minimum of ?10 Crore before the issue opens for the public.
Is a retail investor buying large quantity.
Buys shares only after listing.
Explanation:
Anchor Investors are allocated shares one day before the IPO opens to boost confidence. They have a lock-in period (partially 30 days, partially 90 days).
17. An "Indian Depository Receipt" (IDR) is an instrument denominated in which currency?
Euro
US Dollar
Currency of the issuing company's country
Indian Rupee
Explanation:
An IDR is an instrument in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with SEBI) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities market. It is denominated in Indian Rupees.
18. Participatory Notes (P-Notes) are instruments used by:
Foreign investors to invest in Indian stock markets without registering with SEBI.
Domestic retail investors to invest abroad.
Indian companies to borrow from abroad.
RBI to lend to banks.
Explanation:
P-Notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be part of the Indian stock market without registering themselves directly.
19. The "ISIN" (International Securities Identification Number) code is a unique identifier for:
A Mutual Fund Investor
A Bank Branch
A specific security (share/bond)
A Broker
Explanation:
ISIN is a 12-digit alphanumeric code that uniquely identifies a specific security (like equity share, debenture, etc.) admitted in the depository system.
20. Which regulation governs the obligations of listed companies regarding disclosure and transparency?
SEBI (SAST) Regulations
SEBI (ICDR) Regulations
SEBI (LODR) Regulations
Companies Act only
Explanation:
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) sets out the compliance norms for listed entities to ensure transparency and protect investor interests.
21. What is the effect of the "T+1" settlement cycle in the Indian equity market?
Money and shares are exchanged 24 hours (1 business day) after the trade date.
Trades are settled on the monthly expiry date.
Settlement happens immediately (Real-time).
Trades are settled one week after the transaction.
Explanation:
T+1 means settlement occurs on the next working day following the trade day, releasing capital faster and reducing counterparty risk compared to T+2.
22. SEBI-mandated "Circuit Breakers" in the stock market are triggered based on the movement of:
Individual Stock Prices
Broad Market Indices (Nifty 50 / Sensex)
Foreign Exchange Rates
Bond Yields
Explanation:
Market-wide circuit breakers are triggered by 10%, 15%, or 20% movement in either BSE Sensex or Nifty 50, leading to a temporary halt in trading.