SEBI & Financial Markets — NISM Certification

Before you start: [Financial Markets](/academies/finance/financial-markets/overview) basics (equity/debt/mutual fund fundamentals) are assumed — this page goes deeper on the professional certification and regulatory side. (Note: NISM fees, SEBI limits, and specific figures below reflect commonly cited reference points — verify current values against official SEBI/NISM sources before relying on them.)

Why This Exists (The Hook)

Anyone can technically buy a stock or a mutual fund — but advising OTHERS on what to buy, or dealing professionally in derivatives, carries real risk of harm if done incompetently or dishonestly, which is exactly why SEBI mandates specific NISM certifications for different roles in the financial industry. A mutual fund distributor without the right certification, or an investment adviser giving advice without passing the required exam, isn't just breaking a technicality — they're operating in a role SEBI has specifically gated because the consequences of bad advice at scale (thousands of investors, real money) are serious enough to warrant a competency check.

Analogy — Think of NISM certifications like different driving licenses for different vehicle classes, not one universal license. A regular driving license lets you drive a car — it doesn't qualify you to drive a commercial truck or a motorcycle, each of which has its own separate test because the risks and skills involved are genuinely different. NISM works the same way: a Mutual Fund Distributor certification qualifies you for that specific role, not for dealing in equity derivatives or giving investment advice — each carries its own exam because the competency needed for each role is genuinely different, and SEBI wants that verified separately, not assumed.

Try it (2 minutes) — Reason through why "insider trading on UPSI" carries criminal penalties (₹25 crore or 3x profit, imprisonment up to 10 years) rather than just a civil fine, without looking anything up: UPSI (Unpublished Price Sensitive Information) is information that, once public, would move a stock's price — meaning someone trading on it before it's public has an unfair advantage no other investor in the market has access to. If markets only function fairly when all participants trade on the same available information, what does it do to overall investor trust and market integrity if insider trading were treated as a minor, easily-absorbed cost of doing business rather than a serious criminal offense?

SEBI — Structure & Role

SEBI (Securities and Exchange Board of India) — established 1992 (SEBI Act 1992). Statutory regulatory body for Indian capital markets.

Three-fold objectives:

1.Protect interests of investors in securities

2.Promote development of securities market

3.Regulate securities market

Indian Capital Market Structure

Primary Market

New securities issued -- IPO, FPO, Rights Issue

Secondary Market

Trading of existing securities -- BSE, NSE, F&O

Debt Market

G-Sec, Corporate Bonds, T-Bills

PRIMARY MARKET — new securities issued
    ├── IPO (Initial Public Offering)
    ├── FPO (Follow-on Public Offer)
    ├── Rights Issue
    └── Private Placement / QIP

SECONDARY MARKET — trading of existing securities
    ├── BSE (Bombay Stock Exchange) — Sensex (30 stocks)
    ├── NSE (National Stock Exchange) — Nifty 50
    └── Derivatives: NSE F&O, MCX (commodities)

DEBT MARKET
    ├── Government Securities (G-Sec) — RBI auctions
    ├── Corporate Bonds
    └── T-Bills (91/182/364 days)

Investment Products

Equity

•Shares/Stocks: Ownership in a company. Return through dividends + capital appreciation

•IPO process: Company → DRHP to SEBI → SEBI approval → Anchor investors → Open subscription (3 days) → Allotment → Listing

•Demat account: Electronic holding of shares. Depositories: CDSL, NSDL. Opened via Depository Participant (DP).

Mutual Funds

•Pooled investment vehicle managed by Asset Management Company (AMC)

•SEBI categorisation (2017): 10 equity categories, 16 debt, 6 hybrid, 2 solution-oriented, 2 others

•Key MF types:

- Large cap: Top 100 companies by market cap

- Mid cap: 101–250

- Small cap: 251+

- Flexi cap: Invest across market caps (minimum 65% equity)

- Debt funds: Liquid (< 91 days), Short duration, Long duration, Gilt

- ELSS: Tax-saving equity fund — 3-year lock-in, 80C deduction up to ₹1.5 lakh

NAV (Net Asset Value): Total assets - liabilities / Number of units. Published daily for open-ended funds.

Expense ratio: Annual fee charged by AMC. SEBI limits: 2.25% for equity, 2% for debt. Lower expense = higher returns for investor.

Derivatives

•Futures: Obligation to buy/sell at predetermined price on future date

•Options: Right (not obligation) to buy (call) or sell (put) at strike price

•F&O lot sizes determined by NSE/BSE

•Weekly (Thursday expiry) and monthly (last Thursday) contracts

NISM Certifications

SEBI-mandated certifications for financial market professionals:

Certificate	Who needs it	Cost

|-------------|-------------|------|

NISM-VA: Mutual Fund Distributors	MF distributors, ARN holders	₹1,500
NISM-VIIIA: Equity Derivatives	Persons dealing in F&O	₹1,500
NISM-VIIIB: Currency Derivatives	Currency F&O dealers	₹1,500
NISM-X-A: Investment Adviser Level 1	SEBI-registered advisers	₹3,000
NISM-X-B: Investment Adviser Level 2	Senior advisers	₹3,000
NISM-VII: Securities Operations	Back-office, clearing	₹1,500
NISM-III-A: Securities Intermediaries Compliance	Compliance officers	₹1,500

NISM exam format: 100 MCQs, 2 hours, 50% passing marks, negative marking (-25%). Valid for 3 years.

Stock Market Analysis

Fundamental Analysis

•P/E Ratio: Price/EPS. Higher = expensive relative to earnings

•P/B Ratio: Price/Book Value. < 1 = trading below book value

•EV/EBITDA: Enterprise value multiple. Used for comparison across leverage levels

•ROE (Return on Equity): Net profit / Shareholders equity. > 15% is generally good

•Debt/Equity ratio: Higher = more leveraged. Depends on industry

Technical Analysis

•Support: Price level where buying pressure arrests fall

•Resistance: Price level where selling pressure arrests rise

•Moving Averages: 50-DMA (short term), 200-DMA (long term). Golden cross: 50 crosses above 200 (bullish)

•RSI (Relative Strength Index): 0–100. > 70 = overbought, < 30 = oversold

•MACD: Trend-following momentum indicator. Signal line crossovers generate buy/sell signals

Investor Protection

SEBI Grievance Portal: SEBI SCORES (sebi.gov.in/sebiscores) — online complaint redressal

Investor compensation: IEPF (Investor Education and Protection Fund) — unclaimed dividends, shares transferred to IEPF. Can be claimed by investors.

Insider trading: Trading on UPSI (Unpublished Price Sensitive Information) is a criminal offence. Penalty: ₹25 crore or 3x profit, whichever higher. Imprisonment up to 10 years.

SEBI & Financial Markets — Overview