Unit 2: Indian capital market - Practice Quiz

1 What does the Indian capital market primarily deal with?

2 What is the primary objective of SEBI?

3 What does the acronym SEBI stand for?

4 What was the major global event that led to a massive crash in the Indian capital market in 2008?

5 How did the Indian stock market immediately react to the outbreak of the Covid-19 pandemic in early 2020?

6 Why does SEBI regularly issue new guidelines for the capital market?

7 In which market are new securities issued to the public for the first time?

8 What is the common name for the secondary market?

9 What does IPO stand for in the context of the primary market?

10 What is the defining characteristic of the money market?

11 Which of the following is a key benefit of the money market for commercial banks?

12 Which of the following is a common money market instrument?

13 Who issues Treasury Bills in India?

14 Which institution acts as the central bank of India?

15 Which of the following is a primary function of the Reserve Bank of India (RBI)?

16 Which entity is the primary regulator of the banking system in India?

17 Under which major Act does the RBI derive its powers to regulate banks in India?

18 What major step did the RBI take to provide immediate relief to borrowers struggling during the Covid-19 pandemic?

19 How did the RBI attempt to boost liquidity and encourage lending in the economy during the Covid-19 crisis?

20 Which market provides a platform for investors to liquidate their existing investments?

21 A rapidly growing infrastructure company requires funds to finance a new highway project that will take 5 years to complete. Which segment of the Indian financial system is most appropriate for raising these funds, and why?

22 When SEBI conducts enquiries and audits of stock exchanges to ensure compliance with fair market practices, which category of its functions is it actively performing?

23 SEBI exercises quasi-judicial, quasi-legislative, and quasi-executive powers. Which of the following actions represents its quasi-judicial power?

24 During the 2008 global financial crisis, the Indian capital market experienced a severe crash despite Indian banks having limited direct exposure to subprime mortgages. What was the primary transmission mechanism for this crash?

25 The Covid-19 market crash in early 2020 was characterized by a rapid decline followed by a 'V-shaped' recovery in the Indian capital market. Which factor primarily drove this swift recovery?

26 SEBI recently implemented the 'Margin Pledge/Re-pledge' process for stockbrokers. What is the fundamental investor protection objective behind this guideline?

27 An investor has a grievance against a listed company for non-receipt of dividends. Under SEBI's recent investor protection framework, which platform should the investor utilize to ensure time-bound resolution?

28 A listed company wishes to raise additional equity capital but wants to avoid diluting the ownership percentage of its current shareholders. Which issuance method is most appropriate?

29 In the book-building process of a primary market issuance, what happens when an investor bids at the 'Cut-off price'?

30 How does an active secondary market directly benefit the primary market?

31 The Indian money market is characterized by a 'dichotomous' or dual nature. What does this specifically refer to?

32 A well-developed money market serves as a vital mechanism for the central bank. Which of the following best explains this function?

33 A highly rated corporate entity needs to raise short-term, unsecured funds for 90 days to meet its working capital requirements. Which money market instrument is most suitable?

34 If a commercial bank faces a temporary shortfall in maintaining its Cash Reserve Ratio (CRR) at the end of the day, which instrument will it predominantly use to borrow funds overnight?

35 Treasury Bills (T-Bills) in India are issued at a discount and redeemed at par. If a 91-day T-Bill with a face value of ₹100 is issued at ₹98.50, what does the difference of ₹1.50 represent?

36 As the issuer of currency, the Reserve Bank of India follows the 'Minimum Reserve System'. What does this system mandate?

37 When the Indian Rupee is depreciating rapidly against the US Dollar due to capital outflows, how is the RBI most likely to intervene as the custodian of foreign exchange reserves?

38 Under its regulatory mandate, the RBI occasionally places commercial banks under the Prompt Corrective Action (PCA) framework. Which scenario would trigger this?

39 During the Covid-19 pandemic, the RBI introduced TLTROs (Targeted Long-Term Repo Operations). What was the specific 'targeted' objective of this measure?

40 To alleviate the financial stress of borrowers during the Covid-19 lockdowns, the RBI permitted a six-month loan moratorium. What did this moratorium practically imply for a retail borrower?

41 Which structural shift in the Indian capital market post the abolition of the Capital Issues (Control) Act, 1947, most significantly altered the price discovery mechanism for new equity issuances?

42 SEBI exercises quasi-judicial, quasi-legislative, and quasi-executive powers. In the context of a complex insider trading investigation, which action specifically represents the execution of its quasi-judicial authority?

43 Distinguishing between SEBI's regulatory and developmental functions, which of the following initiatives represents a pure developmental function aimed at deepening the Indian capital market?

44 During the 2008 Global Financial Crisis, Indian equity markets saw massive Foreign Institutional Investor (FII) sell-offs. What structural characteristic of the Indian financial system primarily prevented a systemic banking collapse akin to Western markets?

45 Analyzing the extreme volatility during the March 2020 COVID-19 market crash, Indian stock exchanges frequently halted trading. What is the specific mechanical threshold for the first market-wide circuit breaker in the Indian equity market?

46 Contrasting the post-crash recoveries of the 2008 Financial Crisis and the COVID-19 pandemic in India, which phenomenon uniquely characterized the capital market recovery following the COVID-19 crash?

47 SEBI's mandate transitioning the market to a 'T+1' settlement cycle aims to enhance investor protection and reduce systemic risk. From a clearing corporation's perspective, how does this mathematically impact the Value at Risk (VaR) margin requirements?

48 Under SEBI's recent stringent norms addressing the rise of algorithmic trading utilized by retail investors, how are unregulated Application Programming Interfaces (APIs) mitigated to protect investors?

49 In a heavily oversubscribed Initial Public Offering (IPO) utilizing the book-building process, how are shares mathematically allocated to the Qualified Institutional Buyer (QIB) segment under SEBI (ICDR) Regulations?

50 A listed company launches a Rights Issue fully underwritten by an investment bank. Due to adverse secondary market conditions, the market price of the stock falls below the rights issue subscription price before closure. What is the underwriter's exact regulatory obligation?

51 The Indian money market exhibits a persistent structural dichotomy between the organized sector (banks, primary dealers) and the unorganized sector (indigenous bankers, moneylenders). Which macroeconomic friction does this dichotomy most prominently create?

52 From the perspective of macroeconomic liquidity management, why does the Repo market provide superior and more stable price discovery compared to the Call Money market?

53 A Commercial Paper (CP) with a face value of ₹5,00,000 is issued for 91 days at an annualized yield of . Using the standard discount yield formula, what is the approximate issue price of the CP? (Assume a 365-day year, )

54 If the yield curve for Indian Treasury Bills (91-day, 182-day, and 364-day) becomes steeply inverted, what macroeconomic consensus does this generally signal regarding the RBI's near-term monetary stance?

55 Section 7 of the RBI Act, 1934, grants the Central Government the extraordinary power to issue direct operational mandates to the RBI. Under what strict legal condition can this power be exercised?

56 Operating as the 'Manager of Foreign Exchange' under FEMA, 1999, how does the RBI structurally intervene to manage extreme, sudden depreciation of the Indian Rupee without permanently shrinking domestic liquidity?

57 Under the RBI's Prompt Corrective Action (PCA) framework, if a Scheduled Commercial Bank breaches the most severe threshold (Risk Threshold 3) for Net NPAs and CRAR, which of the following regulatory actions is mandatorily applied?

58 Under the Basel III framework implemented by the RBI, the Capital Conservation Buffer (CCB) is set at of Risk-Weighted Assets. What is the explicit consequence if a bank's capital ratio falls within the CCB range, effectively eroding the buffer?

59 To counter the liquidity freeze during the COVID-19 crisis, the RBI introduced Targeted Long-Term Repo Operations (TLTROs). What was the precise structural mandate for commercial banks availing liquidity under the 'TLTRO 2.0' scheme?

60 During the height of the COVID-19 pandemic, the RBI utilized 'Operation Twist' as an unconventional monetary policy tool. What was the exact mechanistic execution and primary objective of this operation regarding the sovereign yield curve?