(NISM)

The National Institute of Securities Markets (NISM) is a public trust established in 2006 by the Securities and Exchange Board of India (SEBI), the regulator of the securities markets in India. The institute carries out a wide range of capacity building activities at various levels aimed at enhancing the quality standards in securities markets.

SIFs—Will the New Long-Short Framework Succeed?

SEBI introduced the Specialized Investment Funds (SIF) framework effective from April 1, 2025. SIFs are designed to bridge the gap between mutual funds and portfolio management services (PMS), and offer both retail and sophisticated investors a new asset class for investment.

SIFs are designed to permit more aggressive strategies—especially long-short equity positions using derivatives—under a pooled investment structure, unlike the individually managed PMS accounts. The move aligns with global trends that see rising investor interest in tactical and sectoral strategies. However, the point to be noted is that it is often done using short positions as a hedge or return enhancer.

Under the SIF framework, SEBI has capped the maximum short exposure at 25%, and has not prescribed a minimum short threshold. This raises a concern that fund houses could technically launch a “long-short” fund, yet run it like a traditional long-only equity fund, claiming no shorting opportunity exists. These structures are designed to provide fund managers tactical flexibility within investor protection guardrails. The question, is whether these tools will be actively and effectively used, or whether the long-short promise will be diluted in execution.

Key Questions

Though forward looking, the SIF Framework raises key questions: Do fund managers have the conviction and capability to short effectively in India’s growing market? If Cat-III AIFs haven’t embraced shorting despite years of flexibility, will SIFs fare any better? Will SIFs be meaningfully different from long-only funds? Are there enough distributors for selling SIF ? Are Indian fund houses truly prepared—technically and institutionally—to navigate the risks of complex derivative strategies within SIFs?

Is the Shorting Skillset missing?

India’s markets have yet to develop a strong shorting culture. Post-liberalization, only few notable short-sellers had emerged, while currently majority of  fund managers remain long-biased. Shorting demands deep conviction, discipline and risk management. Unless these capabilities evolve, SIFs risk becoming an underutilized regulatory innovation, launched in form but not in spirit.

Shorting in a Growing Economy?

India’s strong macroeconomic fundamentals makes shorting harder to justify. With over USD 700 billion in forex reserves, robust bank and household balance sheets, and FPIs holding over Rs. 80 trillion in assets under custody, the broader market narrative remains positive. Thus, executing nuanced short positions in such scenarios becomes both difficult and risky.

Cat III AIF—an eye opener?

Even in the AIF Cat III space, which has allowed long-short flexibility for years, fund houses have largely stuck to long-biased products, suggesting a lack of conviction or capability to run true short strategies. In practice, very few funds have meaningfully pursued shorting strategies. Most of them are long-biased, often structured to replicate PMS-like flexibility but in a pooled format.

Many Category III AIFs focus on buying and holding stocks (long-only), and are mainly set up this way to avoid the paperwork and complexity involved in handling individual PMS accounts. This shows that just having the rules in place doesn’t mean the market is ready or willing to use more advanced strategies like long-short.

As of March 31, 2024, only 258 of the 1,283 SEBI-registered AIFs are Cat III—the only category allowed to short through derivatives. That just 20% of the registered AIFs are Cat-III funds reflect a lack of traction even in the institutionalized AIF space. This raises further questions whether the SIF framework will have better fate—unless fund managers build real conviction in shorting strategies.

Lack of Certified Distributors

Distributor preparedness is limited, with few MF sellers certified in derivatives—and thus limiting the AMCs ability to garner assets in SIFs.

Derivatives and SIF—Are fund houses prepared?

SEBI’s finding that over 90% of retail traders in equity derivatives lose money, raises questions about the market’s preparedness for complex, derivative-heavy products like SIFs. SIFs are designed to allow long-short strategies, therefore their success depends on sound risk management, skilled fund managers, and investor awareness. Without these, there’s a real risk that SIFs could be misused, remain long-only in practice, or worse—further erode trust in the market they aim to deepen.

Policy Prescriptions

Without a significant shift in market mindset, distribution capability, and shorting skill, SIFs may struggle to scale despite their conceptual strength. To prevent long-only funds masquerading as SIFs, it would be better if certain ‘minimum’ threshold (say 10%-20%) for short positions is compulsorily required for SIFs instead of current requirements which mandates a short position of ‘max’ 25% (fund manager can sit at zero short position and effectively run a long only fund in the name of SIF).

To conclude, while SIFs offer strong structural benefits—such as the flexibility to hedge, take contrarian positions, and navigate volatile markets—their practical adoption may remain limited. Without the right ecosystem, SIFs could eventually be perceived as no different from existing PMS or AIF offerings, despite their differentiated design.

 

Authors:

Kunj Bansal is General Manager and Rasmeet Kohli, is Sr. AGM, at the National Institute of

Securities Markets. Views are personal.

 Originally published in The Mint.

Rating Reset: Building Trust in India’s Debt Markets

In any functioning debt market, Credit Rating Agencies (CRAs) play a critical role in bridging the gap between issuers, regulators, merchant bankers and investors. Rating agencies play a vital role in boosting the bond market by providing an independent and credible assessment of an Issuer’s creditworthiness. These ratings help reduce information asymmetry, enabling investors to make informed decisions and better manage risk. High-quality ratings of instruments / securities attract a wider pool of investors, thereby improving liquidity and market depth. They also assist in pricing bonds appropriately based on risk, which supports efficient capital allocation. Ultimately, by enhancing transparency and investor confidence, CRAs are supposed to contribute towards the growth and stability of the bond market.

In India, however, a series of bond defaults has exposed structural weaknesses in the credit rating ecosystem. Recent incidents, most notably the TruCap Finance default on structured market-linked debentures, have highlighted the issue with rating of debt instruments. Since 2016, India has witnessed several high-profile rating defaults, including IL&FS, DHFL, and Reliance Capital, exposing gaps in credit rating practices. These defaults shook investor confidence and highlighted concerns around rating timeliness and independence. Regulatory tightening followed, with SEBI mandating enhanced disclosures. Despite reforms, the need for more proactive, independent, unbiased, timely, objective and transparent ratings remains critical.

As India seeks to deepen its bond market, both in scale and sophistication, strengthening the credit rating framework is critical. Valuable lessons can be drawn from international reforms, especially in the U.S., EU, and China, regions that overhauled their CRA oversight following crises of their own.

Some Key Challenges faced by Indian CRAs
Despite their integral position in the market, Indian credit rating agencies have faced manifold challenges, mainly due to the following:

  • Reactive approach: Ratings often change only after the financial stress becomes visible or after a default has occurred.
  • Limited disclosure: Methodologies, assumptions, and stress scenarios are often not transparently shared with investors.
  • Lack of dynamic surveillance: CRAs typically rely on periodic financial disclosures and management interaction, rather than ongoing market intelligence or alternative data. Nothing prevents the CRAs from asking for additional information from the companies – in case needed to review the ratings on an ongoing basis.
  • Several high-profile defaults over the last decade, from IL&FS to DHFL have made these shortcomings increasingly untenable.

 

Global Experiences in CRA Reform

United States: The Dodd-Frank Era
The 2008 subprime mortgage crisis exposed how leading CRAs gave ratings to complex, risky financial instruments that ultimately resulted in default. In response, the Dodd-Frank Wall Street Reform and Consumer Protection Act was introduced to provide for the following:

  • Civil liability for CRAs in cases of gross negligence or misconduct.
  • Creation of the Office of Credit Ratings (OCR) under the SEC to conduct annual reviews of rating agencies’ practices, including governance, methodologies, and conflict management.
  • Mandatory disclosures of historical rating performance, analytical assumptions, and methodologies.
  • Enforced separation between analysts and commercial operations to avoid rating manipulation.
  • These measures emphasized accountability, transparency, and deterrence.

 

European Union: Centralized Oversight by ESMA
The European Securities and Markets Authority (ESMA) was given direct supervisory powers over CRAs. Reforms included:

  • Mandatory registration of all CRAs under strict guidelines.
  • Disclosure of rating performance histories and methodological updates.
  • A centralized public database, the European Rating Platform (ERP), allowing investors to access all rating changes and related documents in one place.
  • Stronger emphasis on managing conflicts of interest and preventing “rating shopping.”
  • The EU also introduced  Sanctions for non-compliance, creating a culture of continuous accountability.

 

China: Enforcement and Data Integration
China has approached CRA reform with a focus on enforcement and integration of market data. Key steps include:

  • Regulatory penalties and suspensions for agencies that failed to downgrade entities in a timely manner.
  • Compulsory continuous surveillance rather than a one-time rating at issuance.
  • Use of a centralized credit registry, integrating data across banks, bond markets, and even shadow lenders to assess issuer risk holistically.
  • This approach combines discipline, technology, and surveillance to ensure rating credibility.

 

What India Can Learn: Consolidated Lessons from Global Reforms


Drawing from these international reforms, India can consider a series of concrete changes to strengthen the functioning of its credit rating agencies:

 

Establish a Dedicated Oversight Unit
Just as the U.S. created the Office of Credit Ratings under the SEC, SEBI could consider the establishment of a specialized CRA supervisory cell. This unit should:

  • Conduct annual inspections of Agencies’ governance, compliance, and internal control systems.
  • Track historical performance of rating actions, especially around defaults and stress events.
  • Ensure separation of analytical and commercial functions within CRAs.
  • Review adherence of CRAs to the IOSCO CRA code.

 

Mandate Real-Time and Event-Based Monitoring
Indian CRAs should move away from periodic reviews and move towards dynamic, event-triggered surveillance. Ratings must incorporate:

  • Bond yield movements and market signals.
  • Stock price crashes and promoter share pledging trends.
  • Resignations of key personnel.
  • Negative news or social media sentiment.
  • Advanced analytics, AI models, and integration with credit bureaus and exchanges can support this shift.

 

Improve Methodology Transparency
CRAs must be required to:

  • Disclose rating methodologies and assumptions in public domain documents.
  • Present stress-test scenarios (e.g., interest rate hikes, liquidity crunch) alongside base case ratings.
  • Include qualitative assessments, such as governance quality and regulatory exposure, in addition to financial ratios.
  • These measures help investors make better-informed decisions and evaluate rating reliability.

 

The IOSCO Code of Conduct Fundamentals for Credit Rating Agencies (the “IOSCO CRA Code”) is intended to offer a set of robust, practical measures as a guide to and a framework for CRAs with respect to protecting the integrity of the rating process, ensuring that investors and issuers are treated fairly, and safeguarding confidential material information. Globally, regulators are using the IOSCO CRA Code as the benchmark for registration and oversight programs related to CRAs. Regulators the world over are also looking at ways and means to address the basic issue of ‘Conflict of interest’ associated with the ‘Issuer pays’ model where lines often get blurred between Analyst divisions and Business development functions of CRAs.

India’s ambitions of building a vibrant, globally competitive bond market depend critically on investor confidence and that confidence is deeply tied to the credibility of credit ratings. Recent defaults, like that of TruCap, have shown that without meaningful reform, the current CRA framework risks falling behind the needs of a more dynamic, retail-inclusive debt market.

India doesn’t need to reinvent the wheel. The U.S., EU, and China have all faced similar crises and responded with regulatory clarity, stronger enforcement, and technological integration. These global models offer a clear path forward.

The time is right for a rating reset, where Indian CRAs transform from being reactive scorekeepers to independent, forward-looking sentinels of credit risk – and also looking at other risks which in turn impact the credit rating of instruments. With stronger oversight, better transparency, and smarter monitoring tools, Credit ratings can once again serve their true purpose – protecting investors and strengthening the integrity of financial markets.

Author:
CMA Suresh Narayan, Adjunct Faculty NISM

Index mutual funds: A silent revolution

In India, the Unit Trust of India (UTI) launched the first UTI Nifty 50 index fund in 2000, recently marking its 25th anniversary.

In 1975, John Bogle established Vanguard Mutual Fund, introducing a new style of investing through index mutual funds. Though the first mutual fund was formed in 1924, it took another 50 years and the development of economic theory before index funds emerged.

In 1950, Harry Markowitz in his doctoral dissertation showed that a diversified portfolio of uncorrelated securities had lower risks than investing in a single high-return security. Markowitz’s work laid the foundation of portfolio theory. Despite initial doubts, he was awarded a doctorate in economics and later the 1990 Nobel Prize in economics along with William Sharpe and Merton Miller.

In 1956, William Sharpe advanced Markowitz’s theory by simplifying the computational complexity. He introduced the concept of beta—the covariance between a security and the benchmark index. Sharpe’s Capital Asset Pricing Model (CAPM) became a cornerstone of portfolio management theory.

In the 1960s, Eugene Fama added the Efficient Market Hypothesis (EMH), which posits that stock prices reflect all available information. As a result, no analysis can consistently predict stock movements. Fama received the 2013 Nobel Prize in economics with Robert Shiller and Lars Peter Hansen.

The combined insights of Markowitz, Sharpe, and Fama suggested that investing in a diversified, low-cost index fund is more beneficial than paying fees to active fund managers trying to beat the market.

Bogle implemented these lessons by launching the first low-cost index fund, the First Index Investment Trust (now Vanguard 500 Index Fund) in 1975. Vanguard significantly reduced expense ratios—from 0.68% in 1975 to 0.09% in 2021—contributing to the broader decline in mutual fund costs.

In 1993, Exchange Traded Funds (ETFs) were introduced, allowing index funds to be traded like stocks. Today, there are around 12,000 ETFs worth $13 trillion globally.

In India, UTI launched the first ETF in 2001. By 2007–08, there were 13 ETFs (including gold ETFs), accounting for 0.6% of total equity MF assets. Passive investing has grown rapidly since. By December 2020, there were 32 index funds and 87 ETFs, representing 0.5% and 9.2% of equity assets. By April, the numbers surged to 309 index funds and 253 ETFs, with shares of 4.1% and 12.5% respectively.

This growth is due to innovation in index and ETF offerings from both established and new MF companies. However, there’s still potential, as passive funds comprise nearly 50% of total assets in developed markets.

Index mutual funds have created a silent revolution by offering accessible, low-cost investing options. In countries like India, this revolution is just beginning.

Author: Amol Agrawal, Associate Professor

This article was originally published in Financial Express.

RBI has initiated the rate cut cycle. Which debt funds should you prefer?

Mark-to-market gains should not be the only objective for investing in debt funds

For quite some time, market has been expecting rate cut(s) from the RBI. Based on this expectation, the recommendation has been for longer duration funds. The rationale is, given that interest rate and bond price move inversely, longer the duration of the fund, higher will be the gains. On 7 February 2025, the Reserve Bank of India (RBI) initiated the rate cut cycle. The repo rate, which is the signal for interest rates across the system, was reduced by 25 basis points from 6.5 percent to 6.25 percent. Now it is time to take stock.

View going forward

The expectation going forward is that the RBI would execute another 25 basis point cut, or at most two more cuts of 25 basis points each, at an appropriate time. This cycle is going to be a shallow rate cut cycle, as they have to take care of inflation as well. Markets, however, react in anticipation. The 10-year government bond yield eased from 7.2 percent on 1 January 2024 to 6.75 percent on 6 February 2025, even before any rate cut. As and when market starts anticipating the next rate cut, yield level on bonds would ease further. That is, there is further scope for gaining from interest rates coming down. However, it has to seen in context.

How debt funds work

Returns of debt funds come from two avenues. Bonds and other instruments in debt funds have coupon or interest, which is accounted for in every day’s net asset value (NAV) on a proportionate basis. This component of returns from debt funds, which is known as accrual as it accrues gradually every day, happens any which way, irrespective of market movements. The other part is mark-to-market gains or losses. The daily NAV is computed, taking that day’s bond prices into account. When interest rates come down (bond prices move up), it adds to accrual returns. When interest rates move up (bond prices come down) it takes away from accrual returns.

When there is a rally in the market i.e. bond yields are coming down, bond prices are moving up and adding to your returns, accrual levels for the subsequent period is coming down. Let us take an illustration. Year one, the yield-to-maturity of the fund is 8 percent and recurring expense is 1 percent. Hence the net accrual level is 7 percent. To be noted, this 7 percent is not a given, not a commitment from the Mutual Fund, but an illustration for understanding. If yield level in the market does not move, over one year, you will get approx. Rs 7 per Rs 100 of investment. Now let us say there is a rally in the market of 50 basis points (0.5 percent). The addition to accrual due to yield coming down is a function of the modified duration of the fund, which is a data point available in the monthly fact sheet.

If the portfolio maturity of the fund is say 9 years and modified duration is say 5 years, then the mark-to-market addition is 0.5 percent X 5 = 2.5. Your overall return is 7+2.5 = Rs 9.5 per Rs 100. If the portfolio maturity of the fund is 3 years and modified duration is 2.5 years, then the mark-to-market addition is 0.5 percent X 2.5 = 1.25. Your overall return is 7+1.25 = Rs 8.25 per Rs 100.

The point is, after the rally of year one, for the second year, your accrual level is 6.5 percent, down from 7 percent. Unless there is further rally in year two, your returns will be approx. 6.5 percent. If your approach is to benefit from the rally and move out i.e. you want to take 9.5 percent and exit, then you have to be clear in your mind. Post exit from the debt fund, where you would move to e.g. equity fund / any other category, and what is the rationale for the move. Your portfolio should not be managed on the basis of jumping from one asset class to another, but a judicious allocation as per your objectives.

Recommended approach

One defining aspect of debt funds is that there is a correspondence between fund portfolio maturity, volatility and ideal investment horizon. While volatility i.e. yield levels moving up or down will be there, the accrual will take care of it. The impact of volatility on the fund returns will be proportionate to the modified duration, which is a function of portfolio maturity of the fund. Longer the maturity and duration, higher the impact, and vice versa. As a ballpark guidance, it is recommended that you match your investment horizon with the portfolio maturity. When there is adverse volatility i.e. yield levels move up, the accrual over that period of time (your holding period) will take care of it.

In the earlier examples, when you get say 9.5 percent or 8.25 percent in year one and 6.5 percent in year two, over the investment horizon, it averages out. Your annualized return would be somewhere around the return which initially you would have realistically expected, not just looking at the benefit of the rally.

SEBI has defined 16 debt fund categories, and there is some extent of uniformity in the Mutual Fund industry on the portfolio maturity in a given category. As an example, Gilt Funds (government bond funds) would be run with a long portfolio maturity and portfolio duration. Corporate Bond Funds would have a portfolio maturity of say 4 – 5 years, and Short Duration Funds around 3 years. The data on portfolio maturity and duration is available on the monthly factsheet, which is published on the website of Mutual Funds.

Conclusion

If you want to benefit from the remaining part of the rally e.g. 10-year government bond yield moving to say 6.5 percent, you can play it through Gilt Funds, which usually have long duration. Towards the end of the rally, if you do not have the requisite long investment horizon, you can move to a relatively shorter maturity / duration fund. To be noted, this has a tax implication. Capital gains are taxable as short term capital gains at your  marginal tax slab, irrespective of your holding period. Dividends (now known as income distribution cum capital withdrawal) also are taxable at your marginal slab rate. You have to take your decision, keeping in mind the expected returns from the fund, and tax implication.

Author: Joydeep Sen, Corporate Trainer (Financial Markets)

Originally publish in Outlook Money on 19 th March, 2025

https://www.outlookmoney.com/invest/how-rbis-rate-cut-affects-debt-funds

Mind Over Money: Why Young Investors Need More Than Just Social Media Advice

Young adults, those between the ages of 18 and 35, form a key demographic in India. They account for a population of about 600 million individuals. Over 90% of them actively save money. About 30% of them actively invest some portion of their savings. Of these young adults who invest, almost 60% use social media, like YouTube and X, for financial guidance. For them, the first port of call for financial advice is the internet, and many of them invest money based on social media recommendations.

This dependence on the internet for financial decision-making brings with it a unique set of problems – of information overload, impulsive decision-making, and behavioral biases. Decades ago, the psychologist and Nobel laureate, Herbert Simon, pointed out that humans were struggling with an information overload and that the wealth of information we encounter every day creates a “poverty of attention”. This is especially true when it comes to financial advice. Every other TV channel, every third consolidated email, and innumerable financial websites are doling out financial advice. They are telling viewers and readers which Mutual Fund schemes, stocks, or bonds to buy or sell. The battle for focus – for a few seconds of attention – has reached epic levels. Competing demands for our attention can deplete our mental bandwidth and hinder our ability to make sound financial decisions. Along with this information overload, technology now permits investors to transact anytime, anywhere. This is making us more impulsive investors. We no longer see patience as a virtue. Instant access, coupled with our behavioral biases, fuels our FOMO.

Why is it that young adults find it so difficult to reach out to experts for financial advice? A few explanations come to mind:

  • In this internet age, it is much easier to access information online as compared to consulting with a financial advisor.
  • Young investors are unsure as to what supportive services their financial advisors have to offer, beyond what they can access on their own on the internet.

 

Young investors should and will demand low-touch, digitally driven solutions for routine services like KYC, transaction processing, tracking of their investments, etc. However, for high-quality solutions across lifecycle stages that fit their risk profiles, young investors must wean themselves away from the internet and social media and look for human assistance to support their decisions. A financial advisor can help them cut through the clutter and noise. They can help them with mindful investing.

Author: Shri Sashi Krishnan, Director, NISM

This article was originally published in NISM Newsletter July 2025.
To read the newsletter Click Here.

Mastering the Market: Investment Banking as a Career in India (Part 2)

1. Introduction: The Catalyst Behind Capital Allocation

Investment banking has quickly become a strategic pillar of India’s rapidly changing financial landscape. Whenever firms need to raise funds, negotiate mergers, or reach overseas investors, the expertise of investment bankers proves indispensable. In light of India’s goal of a $30 trillion economy by 2047 the demand forskilled professionals who command finance, regulation, and forward-looking strategy has never been greater.

Aspiring candidates hoping to enter this high-pressure, high-reward field benefit from clear, credible training routes. National Institute of Securities Markets (NISM) meets that need by offering certification courses and online modules that act as practical gateways into investment banking.

2. NISM’s Role in Financial Market Talent Development:

National Institute of Securities Markets (NISM)- A Capacity Building Initiate of SEBI has become India’s foremost center for education and certification in the securities market arena. Since 2006 it has been instrumental in developing ethical, competent professionals who are ready to engage with the market. NISM updates its curriculum regularly to reflect new regulations, technological advances, and international benchmarks.

Its certificates are now a standard credential across financial services, and many top employers in investment banking and equity research treat them as essential or preferred. The Institutes dedicated e-learning portal further broadens access, allowing learners from Tier I, II, and III cities to enroll in high-quality programmes, and thus promoting equitable growth in the country’s financial talent pool.

Whether you are a college student curious about capital markets, a finance graduate aiming for an analyst role or a working professional seeking to pivot into investment banking, NISM’s offerings modular and stackable pathways offer tailored solutions to suit your journey.

3. Certifications That Matter: A Roadmap for Aspiring Investment Bankers:

Table 1
NISM Certifications and E-learning Pathways for Investment Banking Careers

 
Career Stage NISM Certifications / E-Learning Modules Purpose and Benefits
Entry Level (0–2 yrs) Securities Markets Foundation Certification
Securities Market Primer (SMP)
Securities Law: Concept
The module outlines core market principles, the functions of intermediaries, and key legal concepts in finance. It is designed for students, recent graduates, and early-career professionals who want a broad overview. All classes are offered online, providing the flexibility to study at convenient times.
Mid-Level (2–5 yrs) Research Analyst Certification
Corporate Restructuring: Concept
Merchant Banking – Concept
The program trains participants in core analytical, valuation, and transaction-modeling techniques typically assessed during investment-banking interviews. Flexible, self-paced modules allow learners to advance their skills without interrupting their professional commitments.
Advanced (5+ yrs) Merchant Banking – Concept
Merchant Banking – Operations
Tailored for experts preparing to step into leadership positions. A blend of certification training and specialized modules equips participants to confidently manage mandates such as IPOs, debt offerings, or M&A advisory.

4. Benefits of Pursuing NISM Certifications:

While hands-on work is undoubtedly useful, many financial employers now prioritize certified knowledge that can be easily verified. NISM qualifications offer this proof, strengthening your CV while reinforcing key technical and ethical skills.

Why Choose NISM?

  • Regulatory Alignment: Because every NISM exam meets SEBI rules and is revised with each policy change, certification signals immediate compliance.
  • Career Differentiator: Leading banks, brokerages, and boutique advisory houses often prefer, and sometimes require, NISM-trained talent for client-facing roles.
  • Geographical Reach: NISM’s flexible online platform removes location as a barrier, giving learners across India equal access to high-quality financial education.
  • Stackable Learning: Candidates can start with basic modules and steadily move toward advanced diplomas, creating a tailored, cumulative skill path.
  • Credibility and Trust: Originating from SEBI, each NISM badge carries weight, boosting your standing in every corner of India’s diverse finance sector.

 

5. Conclusion:

As India’s capital markets mature and the economy pursues greater global financial links, investment banking will continue to sit at the professions leading edge. Those who wish to join this change must arrive technically skilled, firmly ethical, and strategically informed.

NISM offers the ideal launchpad through relevant, cost-effective, and SEBI-recognized programs that take you from initial curiosity to solid competence. Whether you are entering investment banking for the first time or aiming to strengthen your current qualifications, your journey begins here.

References:

 

Author: Dr. Shubhangi Chaturvedi, A.M (Sr)- NISM

Mastering the Market: Investment Banking as a Career in India (Part 1)

1. Introduction: The Catalyst Behind Capital Allocation

Investment banking occupies a central position in the modern financial system, guiding firms through mergers and acquisitions, arranging both debt and equity financing, and crafting bespoke financial structures. In an information-rich global market, these banks analyze vast datasets to inform every deal, weighing risk, precise valuation, and long-term strategy.

For driven graduates, the sector promises challenging analytical work, visibility on landmark transactions, and a front-row seat to India’s economic transformation, all of which enrich professional development and personal ambition.

2. Why Build a Career in Investment Banking?

Investment banking sits at the core of modern finance, guiding firms through initial public offerings, mergers and acquisitions, debt placement, and organizational refinancing. With India’s goal of reaching a 30-trillion-dollar economy by 2047, these bankers will be essential in channeling capital and structuring transactions that support that ambitious expansion.

  • Strategic Impact & National Development: Investment bankers design the pathways through which firms tap both public and private capital, whether by shaping equity and debt offerings or by steering sensitive mergers and acquisitions. Their work therefore plays a crucial role in job creation, infrastructure financing, and the growth of new industries, positioning these professionals at the forefront of India’s ongoing economic transformation.

 

  • High Reward Potential & Mobility: The intricate nature and substantial dollar amounts involved in investment banking routinely led to generous salaries, large year-end bonuses, and opportunities for temporary assignments overseas or work on cross-border deals. In addition, core skills such as company valuation, detailed financial modeling, deal negotiation, and familiarity with regulatory frameworks are easily transferred, allowing former bankers to move into private equity, venture capital, corporate finance leadership, and even advisory roles in public policy.

 

  • Fast‐Paced Learning & Reputation: Daily routines in investment banking expose you to the latest financial strategies, sophisticated valuation methods like DCF, comparable, and LBO models, and the fast-moving pulse of the market. Working on headline transactions often reported by The Economic Times, Reuters, and other media not only enhances your reputation but also broadens your grasp of how global capital flows.

 

  • Alignment with Policy & FinTech Innovation: As the Indian government and SEBI continue to push for deeper markets, green finance, and FinTech innovation, employers increasingly seek professionals who can underwrite green bonds, structure ESG-linked deals, or run API-driven securities-issuance platforms. Careers in these areas are likely to remain strong and grow because both rules and technology will keep changing.

 

  • Timing & Demand: With an increasing number of Indian firms gearing up for initial public offerings—prompted by the need to exit from start-ups, by public sector undertakings seeking disinvestment, and by a more polished financial ecosystem—the call for investment banking professionals who possess strong analytical skills and valid SEBI or NISM credentials is set to grow. Market projections suggest that India’s investment banking revenues could expand at a compound annual growth rate of more than 8 percent through 2030 (MRFR, 2025), creating a solid pathway for newcomers who master the necessary competencies.

 

3. Skills, Education & Certifications:

Table 1
Key Skills, Education, and Certifications for Investment Banking Careers Sector

Category Key Requirements
Education International structuring and compliance
Certifications NISM Certification Exams, NISM E- Learning Courses, CFA, Financial

Modelling Courses

Technical Tools Excel, Python/R, Bloomberg, PowerPoint
Soft Skills Negotiation, Presentation, Financial Storytelling
Regulatory Awareness SEBI regulations, RBI frameworks, FEMA norms

Note: This table outlines essential qualifications and tools that support career development in investment banking.

4. Career Pathway: Roles by Experience

Table 2
Career Pathway in Investment Banking by Experience Level

Category Role Responsibilities
0–2 yrs Analyst Valuations, Models, Market Scans
2–5 yrs Associate Client Pitches, Deal Execution
5–10 yrs VP/Director Origination, Negotiations
10+ yrs MD/Partner Leadership, Strategic Direction, Public Presence

Note: Career progression in investment banking typically moves from analytical support roles to client-facing, strategic leadership positions.

5.Top Employers in India:

  • Global Players: Goldman Sachs, Morgan Stanley, J.P. Morgan
  • Domestic Leaders: Kotak IB, ICICI Securities, Axis Capital
  • Boutique Firms: Avendus, Ambit, Equirus
  • Fintech & ESG: Cred Avenue, Re New, Green Investment Bank India

 

6. Conclusion: Is IB the Right Career for You?

If you are intellectually curious, perform well in demanding settings, and want a role where your analyses literally reshape institutions and markets, investment banking stands out as one of the most consequential paths in finance.

Because India is rapidly positioning itself at the centre of the global economy and because fresh capital is urgently needed for infrastructure, startups, and sustainability projects, the call for well-trained bankers will only grow louder. Focus on solid foundational skills, seek out experienced mentors and earn credentials such as the NISM Certification in Investment Banking, CFA Charter and financial-modelling badges you can open a door to work that combines numbers, influence, and societal purpose.

On the long march towards Viksit Bharat by 2047, investment bankers are not merely casting spreadsheets- they are designing the very blueprints that guide the nation forward in wealth and opportunity.

References:

 

Author: Dr. Shubhangi Chaturvedi, A.M (Sr)- NISM

Common Myths of Derivatives Trading Debunked

Executive Summary
Derivatives trading, often portrayed as a high-stakes gamble reserved for financial elites, has seen a surge in retail participation — yet misconceptions continue to cloud public understanding.

Derivatives are widely misunderstood as overly complex, excessively risky or used exclusively by institutional investors and other sophisticated market participants.

When the world’s greatest investor terms them as “Weapons of mass destruction”, they are bound to evoke strong reactions. Some see them as sophisticated tools for hedging and speculation, while others view them as opaque instruments best left to professionals.

However, much of the fear and confusion stems from persistent myths. Let’s have a look at some of the most common misconceptions and try to unravel the truth behind derivatives trading.

This report aims to demystify the world of derivatives by addressing and debunking the most pervasive myths that mislead investors and distort market perception. It maintains that with proper understanding and risk management, derivatives can be a valuable tool for hedging, directional strategies, and portfolio diversification.

Common Myths of Derivatives Trading Debunked

Myth 1: Derivatives Are Only for Experts and Big Institutions
Debunked: It’s true that large players, particularly institutional investors, dominate the derivatives market. However, retail participation has increased significantly in the past 6-7 years — especially in equity options and futures. As per a recent SEBI report, individual traders constitute over 95% of participants in the Futures and Options segment and account for about 30% of the total turnover. With the rise of online platforms, fininfluencers, educational content, and risk management tools, derivatives are more accessible than ever. What will eventually matter is not the size of your transaction, but your strategy and discipline.
Reality: With proper education and risk controls, even individual investors can use derivatives effectively.

Myth 2: Derivatives Are Inherently Risky and Speculative
Debunked: Derivatives are instruments or tools — how you use them determines the level of risk. They can be used to protect portfolios, lock-in prices, or reduce exposure to volatility. They can also be used to amplify gains and losses through leverage per se, but the risk depends on the way it is used in the market and not the instrument itself.
Reality: Derivatives can reduce risk when used for hedging, just as they can increase it when used for speculation.

Myth 3: Derivatives Have No Real Value—They’re Just Gambling
Debunked: This myth confuses speculation with gambling. Derivatives derive their value from underlying assets like stocks, indices, agricultural products, precious metals, energy, metals, interest rates etc. They serve real economic purposes i.e. there is an economic rationale behind the functioning of such markets, namely price discovery, liquidity, and risk transfer.
The sheer size of the derivatives market, the quality of participants, lower transaction costs, benefit of leverage and the ability to go long and short will make the flow of information through the system almost instantaneous when seen in an overall context, and this in turn will lead to an efficient price discovery mechanism. There is enough empirical evidence to support the evidence that the introduction of derivatives trading has vastly improved the volumes and depth in the underlying market. Finally, the derivatives market functions like a gigantic insurance company redistributing risk amongst the various market participants.
In fact, many businesses use derivatives to stabilize cash flows and manage costs.
Reality: Derivatives are essential to modern financial markets and serve practical, value-adding functions.

Myth 4: You Need to Hold Derivatives Until Expiry
Debunked: It is widely believed that one must hold on to options or futures until expiration. In reality, derivatives can be traded like any other asset class in the market, i.e. you can enter or exit as per your preference. Therefore, most derivative contracts are traded day-in and day-out; they are closed out or rolled over before expiry. Liquidity in these markets allows for flexible entry and exit strategies.
Reality: You can exit a derivative position any time before expiry, just like selling a stock.

Myth 5: You Can Only Lose Your Premium in Options
Debunked: This is true for buyers (holders) of options, but not for sellers (writers). Selling naked options can expose the trader to unlimited losses. Many traders underestimate the risks of writing options without proper hedging. Writing options look like easy money to novice traders and attract them in droves almost everywhere in the world. The “lure of the lucre” is a temptation too strong to resist.
Reality: Option sellers face significant risk and must manage margin and exposure carefully.

Myth 6: Technical Analysis Doesn’t Work in Derivatives
Debunked: Contrary to popular perception, technical analysis and derivatives trading go hand in hand. Technical Analysis is widely applied in derivatives trading, particularly in short-term strategies. Indicators like Moving Averages, Super trend, RSI, MACD, Price-volume-OI profile and some important chart patterns like Marubozu, Hammer, Doji, Engulfing Pattern etc., can help a trader identify entry and exit points. In fact, derivatives markets often exhibit patterns and volatility that technical traders thrive on.
Reality: Technical indicators are highly relevant in derivatives, especially for timing trades.

Myth 7: Derivatives Are Only for Short-Term Trading
Debunked: While many use derivatives for short-term speculation, they’re also powerful tool for long-term strategies. Portfolio managers use index futures for tactical asset allocation, and corporations hedge currency or commodity exposure months or years in advance.
Reality: Derivatives can be tailored for both short-term trades and long-term hedging strategies.

Myth 8: Only Sellers of Options Have to Pay Initial Margins
Debunked: Although margins are largely payable by option writers or sellers, there are certain conditions under which even the buyer of the option needs to pay the margins. During the expiry week the buyer of the option will have to pay margins if his strike becomes in-the-money. This is applicable to both call options and put options. The margin increases as the expiry date approaches, giving the trader the time to arrange for funds or to exit from his position. On the expiry day the margins are 100% of the exposure.
Reality: In-the-money options attract margins, even for buyers, during expiry week.

And to finally conclude,  Derivatives are neither magic bullets nor ticking time bombs — they’re financial instruments that require understanding, discipline, and strategy. By debunking these myths, traders can approach derivatives with clarity and confidence.

For novice traders, it makes sense to begin with small positions, focus on learning, and always respect the power of leverage. The more you understand the mechanics, the more derivatives become a tool — not a trap.

Global Liquidity at Record Highs: What It Means for Markets and Economic Strategy

In May 2025, the U.S. M2 money supply reached an unprecedented $21.9 trillion, while India’s M2 stood at ₹67.73 trillion (~$765bn). These figures reflect decades of monetary expansion driven by economic crises, policy interventions, and evolving financial systems. But what does this surge in liquidity mean for markets, interest rates, inflation, and long-term economic planning?

Money supply refers to the total amount of money circulating in an economy at a given point in time. It includes physical currency, demand deposits, and other liquid assets. Economists and central banks track money supply to understand liquidity conditions and guide monetary policy.

  1. 1. Understanding Liquidity and Money Supply

Liquidity refers to the ease with which assets can be converted into cash without affecting their price. A high money supply, especially M2, which includes cash, savings deposits, and money market instruments means more money is available in the economy.

Why Does Money Supply Matter?

  • More money = more spending: When households and businesses have more cash, consumption and investment rise.
  • Lower interest rates: Central banks often inject liquidity to reduce borrowing costs and stimulate growth.
  • Asset price inflation: Excess money often flows into stocks, real estate, and commodities, pushing prices up.

 

Example: After the 2008 financial crisis and the COVID-19 pandemic, central banks globally used quantitative easing (QE) to inject liquidity. This helped stabilize economies but also inflated asset prices.

  1. 2. Impact on Financial Markets and Interest Rates
  2. a. Asset Valuations

Increased liquidity tends to boost demand for financial assets:

  • Equities: Investors chase returns in stock markets, driving up valuations.
  • Real Estate: Low interest rates make home loans cheaper, increasing property demand.
  • Gold and Crypto: Seen as hedges against inflation, these assets also attract liquidity-driven investments.

 

  1. b. Interest Rates and Bond Yields

When money supply increases faster than output, inflation can rise. To counter this, central banks may raise interest rates, which can cool demand but also slow growth. Central banks must balance liquidity with inflation control:

  • US. Federal Reserve: Faces pressure to raise rates if inflation expectations rise.
  • Reserve Bank of India (RBI): Has taken a cautious approach, gradually normalizing rates while supporting credit growth.

 

  1. 3. Currency and Inflation Dynamics
  2. a. Currency Strength
  • US. Dollar (USD): Despite high liquidity, the dollar is still strong due to global demand and its reserve currency status.
  • Indian Rupee (INR): Faces depreciation pressure due to trade deficits and capital outflows, though RBI interventions help stabilize it.

 

Example: In 2024-25, the rupee hovered around ₹83–85 per USD, influenced by oil prices, FPI flows, and global interest rate trends.

  1. b. Inflation Outlook

Inflation occurs when too much money chases too few goods. Productivity improvements and efficient supply chains can help offset this. While inflation has moderated post-pandemic, excess liquidity is still a latent risk:

  • India: Food and fuel prices are key drivers. Supply-side reforms (e.g., logistics, Agri-tech) are essential to control inflation.
  • Global: Wage growth and energy prices are major factors. Central banks are closely monitoring inflation expectations.

 

  1. 4. Credit Growth and Economic Strategy
  2. a. Banking Sector and Credit Expansion

Liquidity supports credit growth, which can fuel GDP if directed productively:

  • India: Robust growth in retail loans(housing, personal loans) and infrastructure financing. NBFCs and FinTech’s are playing a growing role.
  • Global: Credit growth is more cautious, especially in developed markets where debt levels are already high.

 

  1. b. Strategic Implications
  • For Policymakers: Focus on channelling liquidity into productive sectors-manufacturing, green energy, digital infrastructure.
  • For Investors: Diversify portfolios, hedge against inflation, and monitor central bank signals.
  • For Learners: Understand how macroeconomic indicators like money supply, inflation, and interest rates interact to shape financial markets.

 

Conclusion: Navigating a Liquidity-Driven World

The surge in global and Indian money supply reflects both past economic interventions and future growth ambitions. While liquidity can support recovery and investment, it also brings risks-asset bubbles, inflation, and currency volatility.

For learners and market participants, understanding the basics of monetary economics is essential. Whether you’re analysing stock trends, evaluating bond yields, or planning long-term investments, keeping an eye on liquidity trends can provide valuable insights.

Author: Mr. Biharilal Deora, CFA, CIPM, FCA

How to Become a SEBI Registered Investment Advisor: Step-by-Step Guide

India’s Growing Securities Market Needs More SEBI Registered Investment Advisers (RIAs): Investing wisely is crucial for financial growth and security. However, navigating the complex world of stocks, mutual funds, bonds, and other investment avenues can be challenging. Investment Advisors (IAs) help investors make informed decisions by providing expert financial advice tailored to individual goals and risk tolerance. This article will provide a comprehensive understanding of investment advisors, the services they offer, grievance redressal mechanisms, benefits of engaging an advisor, and regulations protecting investors.

Who is an Investment Advisor: An Investment Advisor (IA) is a SEBI-registered professional who provides personalized financial guidance to clients based on their financial goals, risk appetite, and market conditions. Unlike Mutual Fund Distributors (MFDs), who earn commissions from mutual fund sales, Investment Advisors charge fees directly from clients and provide unbiased recommendations.

Why India Needs More Investment Advisors (IAs): In recent years, the Indian securities market has experienced significant growth, leading to an increase in domestic investors. However, the number of investment advisors (IAs) has not kept pace with this growth. The ratio of investment advisors per million people in India is low compared to countries like the USA. This discrepancy has resulted in a rise in unregistered entities showcasing themselves as investment advisors. To address this issue and improve investor access to qualified advice, there is a need to significantly increase the number of registered investment advisors.

India urgently needs more qualified SEBI Registered IAs who can guide retail investors with ethical, personalized, and well-informed financial advice. This presents a tremendous opportunity for finance professionals to build a rewarding career while contributing to the growth of India’s capital markets. However, despite this surge in participation, there are currently only 932 SEBI-registered IAs serving more than 18 crore demat account holders. This indicates a significant gap between the demand for investment advice and the availability of qualified professionals.

1. Who is a SEBI Registered Investment Adviser (RIA)?
A SEBI Registered Investment Adviser is an individual or entity authorized by the Securities and Exchange Board of India to provide fee-based investment advice to clients while complying with SEBI regulations and investor protection guidelines.

2. Educational Qualifications Required
As per SEBI regulations, the applicant must possess any of the following degrees:

  • A professional qualification or graduate degree or postgraduate degree or post-graduate diploma (minimum two years in duration) in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science
  • OR a professional qualification by completing a Post Graduate Program in the Securities Market (Investment Advisory) from NISM of a duration not less than one year
  • OR a professional qualification by obtaining a CFA Charter from the CFA Institute

 

3. Experience and Certifications
Experience: No experience required.
Mandatory Certifications:

  • NISM Series-X-A: Investment Adviser (Level 1)
  • NISM Series-X-B: Investment Adviser (Level 2)

NISM Study Material

4. Documents and Fees Required

  • Proof of identity (PAN/Aadhaar)
  • Proof of address
  • Educational qualification certificates (including NISM certifications)
  • CIBIL Score
  • Various other declarations and undertaking
  • Non-refundable Application Fee of Rs. 2,000 for individual and partnership firms; and Rs. 10,000 for Companies including LLPs
  • Registration Fee of Rs. 13,000 for individual and partnership firms (For a period of 5 years); and Rs. 5,15,000 for Companies including LLPs (For a period of 5 years)

 

5. How to Apply for RIA Registration
Step-by-step Guide:

  1. Visit the BSE India website which facilitates IA registration.
  2. Register as a new member.
  3. Verify your mobile number and email ID to receive login credentials.
  4. Log in using the credentials.
  5. Fill out all required details across 12 tabs, including:
    • Applicant details
    • Address details
    • Other details
    • Personal details
    • Associate companies Registration details
    • Other
    • Infrastructure details
    • Other information
    • Change in control
    • Questions
    • Bank details
    • Declaration

 

Watch the Webinar on Registration Process for Investment Advisers by SEBI and BSE: Registration process guidance

Important Links
NISM Login Portal
NISM Study Material
IA application Documents Checklist
BSE IA Registration Page

NISM Certification Helpdesk
• Phone: +91-8080806476
• Timing: Monday to Friday, 9:30 AM – 5:30 PM (Closed on public holidays)
• Email: certification@nism.ac.in
• For registration process important contact from SEBI & BSE – Refer BSE India website

For more information, please refer to the following:
FAQs on SEBI website for IA Registration
BSE SOP for Registration

Author: N.U. RAJU, DGM, SEBI

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