NISM Certifications · NISM-Series-VI: Depository Operations
Introduction to the Indian Capital Market for NISM Depository Operations
The Indian capital market is where long-term securities such as shares and debentures are issued and traded. In the primary market, issuers raise fresh funds from investors. In the secondary market, investors trade existing securities on exchanges. For NISM-Series-VI, know how the two differ and where depositories fit in.
What this chapter covers
This chapter is your base for the whole paper. It explains what the securities market is, why it exists and how it is split into two parts. The primary market is where securities are issued for the first time and the issuer receives the money. The secondary market is where those securities are then bought and sold among investors, and the issuer gets nothing from these trades.
The chapter also introduces the main players: issuers, investors, stock exchanges, intermediaries, clearing corporations, depositories and the regulator, SEBI. You do not need deep detail on each here. You need to know who does what, so the later chapters make sense.
This links directly to the rest of NISM-Series-VI. Depositories hold securities in electronic form. Those securities are created in the primary market and traded in the secondary market. Later chapters on account opening, transfers, settlement, pledge and corporate actions all assume you understand this flow. Learn it well now and the later chapters become easier.
An introductory chapter like this usually gives you quick, low-risk marks, because the questions test clear definitions and distinctions rather than long calculations. It is also the vocabulary for every later chapter. If you confuse primary and secondary market, or mix up the roles of exchange, clearing corporation and depository, you will lose marks here and in settlement and operations questions. This paper has negative marking, so a confident, accurate answer matters more than a guess. A short, careful study of this chapter pays back across the whole paper.
Introduction to the Indian Capital Market: topics in the order to study them
- 1Securities Market: Primary and Secondary MarketsIt is the only topic in this chapter, and it sets up the vocabulary of issue, trading, intermediaries and regulation that every later chapter uses.
How to prepare Introduction to the Indian Capital Market
This chapter is mostly concepts and distinctions, so study it in short, focused sessions and test yourself often.
- Read the chapter once without notes to get the overall picture of how securities move from issuer to investor.
- Write one line each defining the primary market and the secondary market. Add who receives the money in each case.
- List the participants (issuers, investors, exchanges, intermediaries, clearing corporations, depositories, SEBI) and note one role for each.
- Draw a simple flow: issuer, primary market, investor, secondary market, another investor. Mark where the depository holds the securities.
- Make a two-column comparison of primary versus secondary market and revise it until you can recite it from memory.
- Attempt practice MCQs on this chapter. For each wrong answer, note the exact wording that tripped you.
- Revisit the chapter again after finishing the depository chapters, to see how the basics connect.
Common mistakes in Introduction to the Indian Capital Market
Saying the issuer gets money when shares are traded on the exchange.
Fix: Link issuer proceeds only to the primary market. In the secondary market, money moves from buyer to seller.
Treating primary and secondary market as two physical places.
Fix: Think of them as two stages of a security's life: first issue, then trading.
Mixing up the roles of the exchange, clearing corporation and depository.
Fix: Remember: the exchange matches trades, the clearing corporation settles them, and the depository holds the securities in electronic form.
Skipping this chapter as too basic.
Fix: Revise it properly. Basic definition questions are easy marks, and wrong answers cost you through negative marking.
Guessing on options that look similar.
Fix: Read every option fully and match it to your one-line definition before you choose.
Last-day revision: Introduction to the Indian Capital Market
- The securities market has two parts: primary market and secondary market.
- Primary market: securities are issued for the first time and the issuer receives the funds.
- Secondary market: existing securities are traded between investors, usually on stock exchanges.
- In the secondary market, the issuer does not receive money from trades between investors.
- The secondary market gives investors liquidity and a way to exit.
- The primary market helps issuers raise capital; the secondary market supports price discovery.
- SEBI is the regulator of the securities market in India.
- Depositories hold securities in electronic form and enable transfer without physical certificates.
- Clearing corporations handle the settlement of trades done on exchanges.
- NISM-Series-VI has 100 questions, 100 marks, 2 hours, pass mark 60% and negative marking of 25%.
- Remember that the exchange, the clearing corporation and the depository perform different functions.
Introduction to the Indian Capital Market practice questions
- A client of a depository participant asks which type of capital market instrument represents a loan to the issuer, pays a fixed coupon and g…
- Mr. Iyer asks his DP why a stock exchange's clearing corporation, rather than the two trading parties, becomes the counterparty to each trad…
- Which of the following correctly describes the regulatory arrangement for the Indian securities market in which a depository such as NSDL op…
- A new investor, Mr. Sanjay Kulkarni, wants to understand the structure of the Indian depository system. Which of the following correctly des…
- Kavita Rao, a trainee at a Depository Participant, is asked which of the following is a money market instrument rather than a capital market…
- Ms. Kapoor wants to understand the key difference between the equity market and the debt market in India. Which statement is correct?
- Ritu, a first-time investor in Pune, asks which segment of the securities market is used when a company issues shares to the public for the …
- A company lists its shares through an IPO, and a client, Suresh Patel, asks about the regulator's role. Which statement about SEBI's role in…
Introduction to the Indian Capital Market in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Introduction to the Indian Capital Market: frequently asked questions
What is the difference between the primary and secondary market?
In the primary market, securities are issued for the first time and the issuer receives the funds. In the secondary market, existing securities are traded between investors. The issuer is not paid in these trades.
Why does a depository exam start with the capital market?
Depositories hold securities that are created in the primary market and traded in the secondary market. Knowing this flow helps you understand later topics such as transfers, settlement and corporate actions.
How much time should I spend on this chapter?
Less than on operational chapters, but do not skip it. A few focused sessions plus practice questions are usually enough, and you can revisit it later for revision.
Is there negative marking in NISM-Series-VI?
Yes. The negative marking is 25% of the marks assigned to a question. So avoid blind guesses and eliminate options carefully before answering.