MCQs- CHAPTER 2: INTRODUCTION TO SECURITIES MARKET

The secondary market can be broadly divided into Over-The-Counter (OT Market and Exchange Traded Markets, where securities are traded and settled directly between counterparties or through stock exchanges, respectively.

Exchange Traded Funds (ETFs) provide the advantage of real-time trading at market prices. Unlike mutual fund schemes, ETF units are listed and traded on a stock exchange, allowing investors to buy or sell units throughout the trading day at prevailing market prices.

Underwriters in the primary market undertake to subscribe to any portion of a public offering of securities that may not be bought by investors, providing the issuer with the assurance of purchasing the securities if there is insufficient deman

The regulatory body responsible for overseeing Mutual Funds and Exchange Traded Funds in India is the Securities and Exchange Board of India (SEBI).

Warrants issued by companies are regulated by SEBI in the Indian Securities Market.

When the entire face value of a debenture is converted into equity shares, it is referred to as a Fully Convertible Debenture.

Category I AIFs are the ones that invest in start-up or early-stage ventures, as per the information provide

Depository Participants are entities appointed by depositories to hold and maintain investor-level accounts of securities in electronic form. They enable investors to transact in securities in dematerialized form.

Warrants are options that give the investor the right to buy equity shares of the issuer company at a specified price after a specific time perio

Securities can be issued by companies, financial institutions, or the government. These entities raise funds by issuing securities to investors.

The Securities Contracts (Regulation) Act (SCR includes government securities, derivatives, and shares, scrips, or bonds within its definition of “securities.”

The securities market enables investors and sellers to buy and sell securities, creating liquidity. It facilitates the transfer of resources from those with surplus funds to those with a productive need for them. It also allows issuers to raise funds and investors to exit their investments.

Fully convertible debentures (FC involve the conversion of the entire face value of the debenture into equity shares at a future date.

An IPO refers to the first sale of a company’s common shares to investors at large. It is the first opportunity for the general public to invest in the company.

Foreign currency bonds are bonds issued by a company, government, or SPV in a currency that is different from the currency of its home country. These bonds carry foreign currency risk to the issuer.

Among the given options, only Mutual Funds fall under the category of Institutional Investors in the securities market.

Market indices are used to compare returns on stock investments, track sector performance, and indicate real-time market sentiments. They also serve as benchmarks for equity funds and underlie index funds, futures, and options.

The primary function of the secondary market is to provide liquidity to securities, allowing investors to buy or sell existing securities.

Fully convertible debentures can be converted into ordinary shares of the issuing company according to the terms specified at the time of issue. Non-convertible debentures are purely debt instruments without a conversion feature.

Open-ended mutual fund schemes allow investors to buy and sell units at any time at the Net Asset Value (NAV) linked prices. These schemes do not have any fixed maturity perio

Debentures are instruments used by companies, government, and special purpose vehicles (SPVs) to raise long-term debt. They can be secured or unsecured and have various types such as fully convertible, partly convertible, and non-convertible debentures.

The primary market is where companies raise fresh capital by issuing securities to investors. It is used to generate funds for the growth of the business.

The Sensex is composed of 30 chosen stocks on the BSE and is considered a market cap weighted index.

The statement is false. While SEBI and other regulators under the Companies Act regulate the equity shares market, the Reserve Bank of India (RBI) primarily focuses on regulating the banking sector, monetary policy, and foreign exchange markets.

Depository Receipts issued in India and listed on an Indian Stock Exchange, with foreign stocks as underlying shares, are known as Indian Depository Receipts (IDRs).

The secondary market facilitates trades in already-issued securities, allowing investors to exit their investments or new investors to purchase existing securities.

Proxy Advisory services firms analyze voting proposals and provide recommendations to investors on how they should vote.

Equity shares represent a form of fractional ownership in a business venture. Equity shareholders collectively own the company and bear the risk and enjoy the rewards of ownership.

Warrants are options that entitle an investor to buy equity shares of the issuer company after a specified time period at a pre-determined price. They are issued by companies and traded on stock exchanges.

Securities are transferrable financial instruments or contracts that demonstrate ownership interest or indebtedness in assets of an incorporated entity. This includes equity shares, preference shares, debentures, bonds, and other similar instruments.

According to the information provided, equity shares are regulated by SEBI, along with regulators under the Companies Act.

Trading members, also known as stock brokers, facilitate buy and sell transactions of investors on stock exchanges. They execute trades on behalf of investors and provide access to the stock exchange.

Masala bonds are issued outside of India but denominated in Indian Rupees (INR). Unlike foreign currency bonds, the currency risk is borne by the investor, and if the INR depreciates, the investor receives less in their local currency terms.

Foreign currency bonds are issued by companies in a currency that is different from the currency of their home country. These bonds create foreign currency risk for the issuer.

The Indian securities market offers a wide range of financial products, including equity, debt, and derivative products, catering to different risk appetites and return expectations of investors.

The term “securities” includes shares, stocks, bonds, debentures, derivatives, units or instruments issued by collective investment schemes, and other securities as declared by the Central Government.

Partly convertible debentures (PCDs) have a convertible part that can be converted into ordinary shares and a non-convertible part that is redeemed like any other regular debenture.

Participatory Notes (P-Notes) provide access to Indian securities for foreign investors who do not wish to register with SEBI, enabling them to invest in the Indian stock market.

The given passage defines hedging as taking a position in financial transactions to offset potential losses incurred by another position.

In an eligible public issue, retail investors are those who invest less than or equal to Rs.2,00,000 in the issue, as defined by SEBI regulations.

The clearing corporation in the secondary market acts as a counterparty to all trades done on stock exchanges and guarantees the settlement of these trades, reducing counterparty risk for investors.

The given passage states that the process of converting securities held in physical form into holdings in electronic form is called dematerialization.

An Offer for Sale (OFS) involves the sale of shares by existing shareholders that have already been allotted to them. It does not result in the issuance of fresh shares.

Cumulative preference shares offer a pre-determined rate of dividend, and any unpaid dividends are carried forwar This means that if the company is unable to pay dividends in a particular year, the unpaid dividends accumulate and must be paid in the future before any dividends are paid to common equity shareholders.

Spot trades in the securities market have a settlement period of T+2, meaning the settlement occurs two business days after the trade date. T+0 is for cash trades, and T+1 is for tom trades.