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Exam Review

Key Facts: NISM Series XII (SMF) Exam

100 questions

NISM Series XII (SMF) has 100 one-mark multiple-choice questions totalling 100 marks

NISM - SMF assessment structure

2 hours

Candidates must complete the NISM Series XII exam in 120 minutes

NISM - SMF assessment structure

60% pass

The passing score for NISM Series XII is 60 out of 100 marks

NISM - SMF FAQ

No negative marking

There are no negative marks deducted for wrong answers

NISM - SMF assessment structure

Rs. 1,003

Effective June 01, 2026, the NISM Series XII examination fee is Rupees one thousand three only, inclusive of service tax

NISM - SMF Test Details page

3 years

The NISM SMF certificate is valid for 3 years from the date of the exam

NISM - SMF certification page

6 units

The SMF syllabus is divided into six weighted units

NISM - SMF curriculum

100

Free original practice questions here

OpenExamPrep

NISM-Series-XII (SMF) is a foundational certification from the National Institute of Securities Markets providing a basic conceptual understanding of the Indian securities markets. The exam has 100 multiple-choice questions to be completed in 2 hours, with a 60% passing score and no negative marking. The fee is Rs. 1,003 (effective June 01, 2026) and the certificate is valid for 3 years. The syllabus covers securities markets (10%), asset allocation (20%), primary markets (20%), secondary markets (20%), mutual funds (20%), and derivatives (10%). This 100-question practice bank covers the full curriculum with explanations for all options.

Sample NISM Series XII (SMF) Practice Questions

Try these sample questions to review concepts for the NISM Series XII (SMF) exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1What is the primary role of a financial system in an economy like India?
A.To regulate the physical trade of goods and services
B.To allocate national budgets to state departments
C.To channelise household savings into productive investments
D.To print currency notes and manage monetary policy
Explanation: A financial system facilitates the flow of funds from savers (who have surplus income) to borrowers (who need capital for productive investment). In India, this system consists of markets, intermediaries, regulators, and investors.
2Which of the following represents a direct participant in the securities market who borrows capital by issuing shares?
A.Retail Investor
B.Corporate Issuer
C.Stock Broker
D.Depository Participant
Explanation: Issuers, such as corporate bodies or governments, raise funds from the public or institutional investors by issuing securities like equity shares or debentures.
3How does inflation affect the purchasing power of money over time?
A.Inflation increases purchasing power as prices rise
B.Inflation has no impact on purchasing power
C.Inflation erodes purchasing power by decreasing what a unit of currency can buy
D.Inflation stabilizes purchasing power by fixing interest rates
Explanation: Inflation represents the rate at which the general level of prices for goods and services is rising. As prices rise, every unit of currency buys a smaller percentage of a good or service, thereby eroding purchasing power.
4If an investor earns a nominal return of 10% on an investment in a year when the inflation rate is 4%, what is the approximate real rate of return?
A.6%
B.14%
C.2.5%
D.10%
Explanation: The approximate real rate of return is calculated as the nominal return minus the inflation rate (10% - 4% = 6%). The exact formula is (1 + Nominal Return) / (1 + Inflation Rate) - 1, which yields approximately 5.77%, but 6% is the standard linear approximation.
5Which of the following is considered a component of the organized financial system in India?
A.Local money lenders
B.Indigenous bankers
C.SEBI-registered mutual funds
D.Unregistered chit funds
Explanation: The organized financial system in India consists of entities regulated by statutory bodies such as RBI, SEBI, IRDAI, and PFRDA. SEBI-registered mutual funds operate within this regulated framework.
6Which regulatory body supervises the banking system and money markets in India?
A.Securities and Exchange Board of India (SEBI)
B.Reserve Bank of India (RBI)
C.Insurance Regulatory and Development Authority of India (IRDAI)
D.Pension Fund Regulatory and Development Authority (PFRDA)
Explanation: The Reserve Bank of India (RBI) is the central bank of the country, responsible for regulating banks, supervising the monetary policy, and overseeing the money and government securities markets.
7What happens to the price of existing fixed-rate bonds when market interest rates rise?
A.Bond prices decrease
B.Bond prices increase
C.Bond prices remain unchanged
D.Bond prices fluctuate randomly without relation to interest rates
Explanation: There is an inverse relationship between bond prices and market interest rates. When interest rates rise, newly issued bonds offer higher yields, making existing fixed-rate bonds with lower yields less attractive, causing their prices to drop.
8Which of the following asset classes has historically provided the highest hedge against long-term inflation, albeit with higher short-term volatility?
A.Cash and bank deposits
B.Government bonds
C.Equity shares
D.Treasury bills
Explanation: Equity represents ownership in businesses that can increase prices and earnings in line with inflation. Historically, equities have outperformed debt and cash over long periods, offering a real return above inflation.
9What is the primary function of the Securities and Exchange Board of India (SEBI)?
A.To protect the interests of investors in securities and promote the development of the securities market
B.To print currency notes and set bank repo rates
C.To formulate the annual Union Budget of India
D.To manage government-owned commercial banks
Explanation: SEBI's statutory mandate is to protect the interests of investors in securities, promote the development of, and regulate the securities market in India.
10What is meant by 'allocative efficiency' of the securities market?
A.The ability of the market to channelise funds to their most productive users
B.The speed at which stock brokers execute trades
C.The process of allocating shares to retail investors during an IPO
D.The physical transfer of share certificates to buyers
Explanation: Allocative efficiency is achieved when financial markets successfully channel investible funds to projects and businesses that offer the highest productivity and returns, benefiting the overall economy.

About the NISM Series XII (SMF) Exam

NISM-Series-XII: Securities Markets Foundation (SMF) is a foundational certification administered by the National Institute of Securities Markets. It is designed to provide a basic conceptual understanding of the securities markets and its participants. The syllabus covers the components of the financial system, basics of asset allocation and risk-return characteristics of equity and debt, primary market structures including public issues (IPOs/FPOs) and listing procedures, secondary market operations including trading on exchanges, clearing and settlement, mutual fund concepts and structures, and the derivatives market. The examination consists of 100 multiple-choice questions of 1 mark each, to be completed in two hours, with a 60% passing score and no negative marking. The certificate is valid for three years.

Exam sponsor: National Institute of Securities Markets (NISM), established by SEBI.. The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

100 multiple-choice questions of 1 mark each, totalling 100 marks, drawn from six units covering securities markets, asset allocation, primary markets, secondary markets, mutual funds, and derivative markets.

Time Limit

2 hours (120 minutes).

Passing Score

60% (60 out of 100 marks). There is no negative marking.

Exam / Certification Fees

Rs. 1,003 (inclusive of service tax; payment gateway charges extra), effective June 01, 2026.

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

10%

Understanding Securities Markets and Performance

Role of securities markets in the economy, savings and investments, financial system components, and allocating resources.

20%

Securities: Types, Features, and Asset Allocation

Equity, debt, hybrid and other security types, features, risk-return profiles, and basics of asset allocation and investing.

20%

Primary Markets

Public issue categories (IPO, FPO), private placement, rights issue, intermediaries, role of merchant bankers, underwriters, registrar and transfer agents, and listing processes.

20%

Secondary Markets

Stock exchanges, trading mechanism, clearing and settlement process, role of clearing corporations, risk management, and depositories.

20%

Mutual Funds

Concept, structure in India, types of mutual fund schemes, net asset value (NAV), fees and expenses, and roles of AMCs, trustees, and distributors.

10%

Derivative Markets

Basic concepts of derivatives, forwards, futures, options, swaps, exchange-traded derivatives, and key strategies.

Preparing for the NISM Series XII (SMF) Exam

What You Need to Know

  • Passing score: 60% (60 out of 100 marks). There is no negative marking.
  • Assessment: 100 multiple-choice questions of 1 mark each, totalling 100 marks, drawn from six units covering securities markets, asset allocation, primary markets, secondary markets, mutual funds, and derivative markets.
  • Time limit: 2 hours (120 minutes).
  • Exam / certification fees: Rs. 1,003 (inclusive of service tax; payment gateway charges extra), effective June 01, 2026. Official sources

Using Our Practice Resources

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

NISM Series XII (SMF): Suggested Study Strategy

1Focus on the chapters that carry 20% weight: Securities (Types & Asset Allocation), Primary Markets, Secondary Markets, and Mutual Funds. These four areas make up 80% of the total marks.
2Understand the key difference between primary and secondary markets: primary markets deal with the issuance of new securities (IPO/FPO), whereas secondary markets deal with the trading of already-issued securities on stock exchanges.
3Learn the roles of different market intermediaries, such as merchant bankers, registrar and transfer agents (RTAs), brokers, underwriters, depositories, and depository participants.
4Get comfortable with mutual fund basics, including how Net Asset Value (NAV) is calculated, the difference between open-ended and close-ended funds, and key schemes.
5Study basic derivative definitions and the difference between forwards, futures, and options contracts.
6Since there is no negative marking, ensure you answer all 100 questions on the exam.

Frequently Asked Questions

How many questions are on the NISM Series XII (SMF) exam and how long is it?

The exam has 100 multiple-choice questions of 1 mark each, totalling 100 marks, and must be completed in 2 hours (120 minutes).

What is the passing score for NISM Series XII?

The passing score is 60%, meaning you must score at least 60 out of 100 marks. There is no negative marking.

Does NISM Series XII have negative marking?

No. There is no negative marking for this examination. Each correct answer earns 1 mark, and wrong or unanswered questions do not result in penalty deductions.

What is the fee and certificate validity for NISM Series XII?

Effective June 01, 2026, the exam fee is Rs. 1,003 (inclusive of service tax; payment gateway charges extra). The certificate is valid for 3 years from the date of the examination.

Who should take the NISM Series XII (SMF) exam?

It is open to all and is particularly suitable for students, teachers, new entrants in the financial industry, and retail investors seeking a basic understanding of Indian securities markets.

Are these official NISM practice questions?

No. These are original OpenExamPrep questions modelled on the NISM-Series-XII (SMF) syllabus. NISM provides its own workbook and certification materials separately.