Financial Markets MCQ Quiz - Objective Question with Answer for Financial Markets - Download Free PDF

The correct answer is Two.

Key Points

• Foreign Direct Investment (FDI) in India can be made through two primary routes: Automatic Route and Government Approval Route.
• The Automatic Route allows foreign investors to invest without prior approval from the government or Reserve Bank of India (RBI).
• The Government Approval Route requires investors to obtain permission from the government, specifically from the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, or other authorities depending on the sector.
• Most sectors in India fall under the Automatic Route, with certain sensitive sectors requiring approval under the Government Approval Route.
• The policy framework for FDI in India is governed by the Foreign Exchange Management Act (FEMA), 1999, and is regularly updated by the Department for Promotion of Industry and Internal Trade (DPIIT).

Additional Information

• Automatic Route:
  • Investments do not require prior approval from the government or RBI.
  • Examples include sectors like IT, real estate, and some manufacturing industries.
  • Foreign investors are required to adhere to sectoral caps and guidelines specified by the Indian government.
• Government Approval Route:
  • Investments in sensitive sectors like defense, media, and telecommunications require prior approval.
  • Applications are reviewed by the concerned ministry or department based on FDI policy guidelines.
  • This route ensures that investments align with national security and strategic interests.
• Key Regulatory Bodies:
  • Department for Promotion of Industry and Internal Trade (DPIIT): Responsible for formulating and updating FDI policies.
  • Reserve Bank of India (RBI): Regulates foreign exchange transactions and ensures compliance with FEMA.
  • Foreign Investment Promotion Board (FIPB): Handles approval for investments under the Government Approval Route (now abolished; replaced by DPIIT).
• Sectoral Caps:
  • FDI limits are specified for each sector, expressed as a percentage of equity ownership.
  • For example, FDI in insurance is capped at 74%, while in defense, it is capped at 74% under the Automatic Route and 100% under the Government Approval Route.

The correct answer is Indian Police Service (IPS).

Key Points

• The Indian Police Service (IPS) is one of the three All India Services, established in 1948, replacing the Indian Imperial Police.
• IPS officers are recruited through the Union Public Service Commission (UPSC) Civil Services Examination, a highly competitive national exam.
• The rank of Assistant Superintendent of Police (ASP) is among the entry-level positions for IPS officers after completing their training at the Sardar Vallabhbhai Patel National Police Academy in Hyderabad.
• IPS officers are entrusted with maintaining law and order, crime prevention, investigation, and ensuring the implementation of laws in their jurisdiction.
• The central government appoints IPS officers to key positions like Director General of Police (DGP), Commissioner of Police, and other leadership roles in state and central law enforcement agencies.

Additional Information

• Union Public Service Commission (UPSC):
  • The UPSC conducts the Civil Services Examination annually to recruit candidates for various civil services, including IAS, IPS, and IFS.
  • The exam consists of three stages: Preliminary, Mains, and Interview.
  • IPS aspirants need to secure a rank high enough to choose the IPS cadre during the service allocation process.
• Sardar Vallabhbhai Patel National Police Academy (SVPNPA):
  • Located in Hyderabad, the SVPNPA is the premier training institution for IPS officers.
  • The training program includes physical fitness, law enforcement techniques, ethics, and leadership development.
  • IPS probationers undergo rigorous training to prepare for their roles in maintaining national security and public safety.
• Indian Civil Services:
  • The Indian Civil Services consist of All India Services (IAS, IPS, IFS) and Central Services (IRS, IRTS, etc.).
  • These services form the backbone of India's administrative framework, enabling governance and policy implementation.
• Roles of an IPS Officer:
  • Maintaining internal security and law enforcement in states and union territories.
  • Leading police forces, intelligence agencies, and central armed police forces (e.g., CRPF, BSF).
  • Handling sensitive assignments like anti-terrorism operations, cybercrime investigations, and disaster management.

The correct answer is SEBI.

Key Points

• Securities and Exchange Board of India (SEBI) is the apex body that regulates the capital markets in India.
• SEBI was established on 12 April 1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992.
• The primary objective of SEBI is to protect the interests of investors in securities and to promote and regulate the securities market.
• SEBI is responsible for ensuring the development and regulation of the securities market, preventing malpractices, and ensuring the fair functioning of the markets.
• SEBI's headquarters is located in Mumbai, Maharashtra, with regional offices in New Delhi, Kolkata, Chennai, and Ahmedabad.

Additional Information

• Primary Market
  • The primary market is where new securities are issued and sold to investors for the first time.
  • It is also known as the new issues market.
  • Companies raise capital in the primary market by issuing new shares or debentures.
• Secondary Market
  • The secondary market is where existing securities are traded among investors.
  • It is also known as the stock market or the stock exchange.
  • Investors buy and sell securities they already own on the secondary market.
• Insider Trading
  • Insider trading refers to the buying or selling of securities by someone who has access to non-public, material information about the security.
  • It is illegal as it can give the insider an unfair advantage over other investors.
  • SEBI has stringent regulations to prevent insider trading and protect the integrity of the markets.
• Initial Public Offering (IPO)
  • An IPO is the process by which a private company can go public by selling its shares to the general public for the first time.
  • IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately-owned companies looking to become publicly traded.

The correct answer is Reverse Repo Rate.

Key Points

• The interest rate at which the Reserve Bank absorbs liquidity from banks under the Liquidity Adjustment Facility (LAF), on an overnight basis, against the collateral of eligible government securities, is called Reverse Repo Rate.
• The reverse repo rate is the rate at which banks earn interest when they park surplus funds with the RBI.
• The repo rate helps control inflation, and the reverse repo rate increases liquidity.
• The repo rate set by the RBI is always higher than the reverse repo rate.

Additional Information

The correct answer is - 1992

Key Points

• National Stock Exchange (NSE)
  • The National Stock Exchange was established in 1992.
  • It is one of the leading stock exchanges in India.
  • The NSE was set up to bring about transparency and efficiency in the Indian stock market.

Additional Information

• Establishment and Objectives
  • The NSE was established by a group of leading Indian financial institutions at the behest of the Government of India.
  • The main objective was to provide a modern, fully automated screen-based trading system with national reach.
• Innovations and Milestones
  • The NSE introduced the electronic trading system in India, replacing the traditional open outcry system.
  • It was the first exchange in India to provide a fully automated, screen-based electronic trading system which offered easy trading facilities to the investors spread across the length and breadth of the country.
  • In 1994, the NSE launched the wholesale debt market (WDM) segment for trading in fixed income securities.
• Global Recognition
  • The NSE is recognized globally for its innovative and transparent practices.
  • It is ranked among the world's largest stock exchanges in terms of market capitalization.

The correct answer is Tax.

Key Points

• Capital receipts are the cash received from the sale of fixed assets, cash received from the sale of company shares, and cash received through the issue of a debt instrument, such as loans and bonds.
• Capital receipts are government revenues that either (i) generate liabilities (e.g. borrowing) or (ii) reduce assets (e.g. disinvestment).
• A capital receipt occurs when the government raises funds by incurring liability or selling its assets.
• Revenue receipts are government receipts that do not (i) increase obligations or (ii) deplete assets.
• These are tax revenues, interest, and dividends on government investments, cess, and other government receipts for services given.

• Rani Ki Vav motif is printed on the currency note of ‎₹100 on its reverse side.
• ₹200 Currency Notes contain the motif of Sanchi Stupa on its reverse side.
• ₹50 Currency Notes contain the motif of Hampi on its reverse side.
• ₹10 Currency Notes contain the motif of Konark Sun Temple on its reverse side.

• National Stock Exchange (NSE) is planning to launch its own Initial Public Offering (IPO).
• The announcement was made by its MD and CEO Vikram Limaye.
• The exchange was established in the year 1992 and is headquartered in Mumbai. Nifty is the index of NSE.
• BSE is Asia's oldest stock exchange established in the year 1875 and is headquartered in Mumbai. Sensex is the index of BSE.
• Saurashtra Kutch Stock Exchange (SKSE) is the stock exchange of Gujarat.
• Cochin Stock Exchange (CoSE) is the stock exchange in Kochi, Kerala.

The correct answer is  Bombay Stock Exchange (BSE).

• Sensex, also known as the S&P BSE Sensex index, is the benchmark index of India's BSE, formerly known as the Bombay Stock Exchange.

Key Points

• Stock Exchange: Stock Exchange is a marketplace where financial securities such as shares, bonds, commodities, etc issued by the companies are bought and sold.
• The first stock exchange Amsterdam Stock exchange was established in 1602  by the Dutch East India Company. (Verenigde Oostindische Compagnie or VOC).

Important Points

• Indian Commodity Exchange Ltd (ICEX) was established in 2008, headquartered in Mumbai. The ICEX index is named 'ICEX Main'.
• Bombay Stock Exchange was established in 1875, headquartered in Mumbai. The BSE index is named as 'Sensex- Sensitivity Index'.
• Calcutta Stock Exchange was established in 1908, headquartered in Kolkata. The CSE index is named as 'CSE40'
• The National Stock exchange was established in 1992, headquartered in Mumbai. The NSE index is named 'NIFTY50'.

A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies.

• A bull market is a market that is on the rise and is economically sound, while a bear market is a market that is receding, where most stocks are declining in value. 
• Speculators are sophisticated investors or traders who purchase assets for short periods of time and employ strategies in order to profit from changes in their price. 
• Speculators are important to markets because they bring liquidity and assume market risk.
• A Bear is a speculator, who anticipates a fall in the price of securities. He sells- securities for future delivery. He sells securities which he does not possess with the hope to buy the securities at a lower price before the date of delivery. In India, a bear is also known as mandiwala.
• A bull is a stock market speculator who buys a holding in stock in the expectation that in the very short term it will rise in value whereupon they will sell the stock to make a quick profit on the transaction.

Therefore, Bulls and bears are associated with speculators. 

The correct answer is Listing.

Key Points

• SEBI has proposed a merger of listing rules pertaining to debt securities and non-convertible redeemable preference shares into a single regulation.
• The proposal is aimed at harmonising with the Companies Act, 2013, and maintaining consistency with the SEBI's LODR (Listing Obligations and Disclosure Requirements) rules
• It has invited public comments on the proposal, open for 21 days.

The correct answer is Prathama Bank.

The correct answer is option 5, i.e. all 1, 2 and 3 are true.

• Treasury bills or T-bills, which are organized money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenures, namely, 91 day, 182 day and 364 day.
• Treasury bills are zero-coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity.
• For example, a 91 day Treasury bill of ₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would be redeemed at the face value of ₹100/-.
• The return to the investors is the difference between the maturity value or the face value (that is ₹100) and the issue price.
• This instrument of the money market though present since Independence, got organised only in 1986.
• They developed five types of the TBs in due course of time: (a) 14-day (Intermediate TBs)  (b) 14-day (Auctionable TBs) (c) 91-day TBs (d) 182-day TBs (e) 364-day TBs 
• Out of the above five variants of the TBs, at present only the 91-day TBs, 182-day TBs and the 364-day TBs are issued by the government. The other two variants were discontinued in 2001.

The correct answer is Fiduciary Money.

Key Points

• Fiduciary money is money that is accepted as a medium of exchange due to the trust that exists between the payer and the payee. 
• Cheques are fiduciary money as these are accepted as a means of payment on the basis of trust but not on the basis of any order of the government.
• Fiduciary money, or currency, refers to banknotes and coins in circulation in the economy.
• This is the liquidity available to economic sectors to carry out transactions.

Additional Information

• Credit money is the creation of monetary value through the establishment of future claims, obligations, or debts.
• Fiat money is a type of currency that is not backed by any commodity such as gold or silver. It is typically declared by a decree from the government to be legal tender. 
• Full-bodied money has a face value not in excess of its intrinsic value as a commodity.