10
(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.

Contact Us

Passively Managed Funds and Portfolio Allocation

Posted on by Auburn Solutions

The crux of your investment portfolio is allocation to various investment assets like equity, bonds, gold, etc. Within these are sub-assets e.g. large cap/small cap stocks, long maturity/short maturity bonds, etc.

There is another approach to portfolio allocation. There would be a core part of the portfolio, and a satellite component. The core component is not to be disturbed unless there is a drastic change in the market or in the fund.

The satellite component is for taking tactical calls based on prevailing market situation. The satellite component is meant for taking advantage of market situations, hence the investment tenure can be short term. The more defensive the portfolio, higher should be the core component as satellite is for taking higher risks.

Passive funds: The concept of passive funds is the fund manager does not take any decision on the portfolio. S/he does not take any decision on what to buy or when to sell. The fund manager’s job is to follow the underlying index. As an example, if the underlying index is Nifty50 or Sensex, then the fund manager will mimic that. S/he will buy the same stocks as in Nifty / Sensex, and maintain the same ratio in portfolio allocation. The returns, which simply follow the underlying index, will be similar as of the index. The returns will be marginally lower as there would be some recurring expenses in the fund and tracking error.

Passive funds are available for various asset classes viz. equity, debt (bonds) and commodities. One passive idea or strategy can be followed by multiple Asset Management Companies (AMCs). Example, Nifty50- or Sensex-based passive funds.

Two formats: Passive funds are offered in two formats. One is Exchange Traded Funds (ETFs) where fund units are listed on the exchange i.e. NSE / BSE. Investors can buy/sell ETF units during trading hours. There is no purchase or redemption with the AMC for ETF units. The other format is Index Fund format, where you can buy or redeem with the AMC, like any other open-ended fund.

The advantage of Index Fund format is liquidity; when you want money, just make the redemption request. In ETFs, the advantage is you can do multiple buy/sell trades a day. In Index Funds, you can buy/redeem only once a day, at end-of-day NAV.

Active vs. passive: There is a debate between active and passive funds, which one is better? In active funds, expenses are higher. The expectation is, these funds would generate returns higher than relevant benchmark, which is referred to as alpha.

If the active fund is not beating the benchmark, then why should the investor bear higher expenses? The investor would rather settle for a passive fund. The passive fund would never beat the benchmark, but give similar returns i.e. not underperform grossly.

You should allocate to both as per your objectives, suitability and performance of the funds.

Should passives be part of core portfolio or satellite? There is a tendency to have passives in the satellite component as the core portfolio is expected to accumulate wealth over a long period of time via compounding effect. Since the fund manager needs a long time to outperform the benchmark, it should not be disturbed.

In the satellite portion, since you are taking relatively higher risk, you minimise the possibility of the fund underperforming the benchmark. Having said that, there is a shift, with a good reason, to have passives in the core component of your portfolio.

The portfolio allocation compounding and accumulating wealth over a long period of time should be defensive. That is, the risk of your exposures underperforming the benchmark should be low, as you do not want to go wrong on that part. The satellite portion is meant to bear the risk. If your call / the fund manager’s call goes right, you earn superior returns.

Conclusion: Data shows over 50% of active funds not beating the benchmark. The outcome varies on whether it considers direct plan (relatively lower expense ratio) or regular plan (relatively higher expense ratio). Hence, go for active funds where there is scope for the fund manager to outperform e.g. small cap or thematic funds. In large cap funds, the scope is limited as the universe is only 100 stocks. Where you want to settle for market or near-to-index returns, passives are better which can be core. Where you want higher returns, beating the index, you can allocate in the satellite component.

Author:

By Joydeep Sen, Corporate Trainer (Financial Markets)

 

 

Prerequisites for becoming a SEBI Registered Research Analyst

Posted on by Auburn Solutions

  1. I. Who is/are Securities and Exchange Board of India (SEBI) Registered Research Analyst?
  • A SEBI Registered Research Analyst can be a person or entity registered under the SEBI Research Analysts (RA) Regulations, 2014. As per these regulations:

 

  1. 1. A Research Analyst means a person who, for consideration, is engaged in:
  2. a) the business of providing research services and
  3. b) includes a part-time research analysis.

 

  1. 2. A Research Entity means an intermediary registered with SEBI who is also engaged in:
  2. a) merchant banking; or
  3. b) investment banking; or
  4. c) brokerage services; or
  5. d) underwriting services; and
  6. e) issue research report or research analysis in its own name through the individuals employed by it as research analyst and includes any other intermediary engaged in issuance of research report or research analysis.

 

  1. 3. No person shall act as a research analyst or research entity or hold itself out as a research analyst unless he has obtained a Certificate of Registration from SEBI. This provision is subject to various conditions, therefore, readers are advised to refer to Chapter II Regulation 3 of the SEBI Research Analyst Certification Examination.

 

  1. II. What are the eligibility criteria to become a SEBI Registered Research Analyst?
  • The eligibility criteria for the grant of Certificate of Registration to be fulfilled by an applicant is as follows:

 

  1. 1. Qualification & Other Requirements for a Research Analyst
  2. a) Minimum Qualification Requirements for Research Analysts
  3. The following individuals must meet certain qualification requirements at all times:
    • Individual research analysts,
    • Principal officers of non-individual research analysts,
    • individuals employed and partners of a research analyst engaged in research services

    They must have:

    1. 1. A graduate, postgraduate degree or diploma, or professional qualification in fields like:
    2. i. Finance, Accountancy, Business Management, Commerce, Economics, Capital Markets, Banking, Insurance, Actuarial Science, or other financial services from a university or institution recognised by Central government or any State Government or a recoganised foreign university or institution or association; or
    3. 2. A professional qualification by either:
    4. i. completing a one-year Post Graduate Program in Securities Market (Research Analysis) from NISM, or
    5. ii. obtaining a CFA Charter from the CFA Institute.
    1. b) Additionally:
    • Persons associated with research services must have at least a graduate degree from a university or institution recognized by the Central Government or any State Government or a recognized foreign university or institution.
    • All such individuals must hold a valid NISM certification as specified by SEBI.
    • A fresh relevant NISM Certification as specified by SEBI from time to time shall be obtained before expiry of the validity of the existing certification to ensure continuity in compliance with certification requirements.

 

  1. 2. Type of Applicant

For the purpose of grant of Certificate of Registration, the applicants are required to be certified and qualified as per the Regulation 7 of the SEBI RA Regulations, 2014. They are:

  1. 3. Other Criteria
  • Deposit Requirement: The applicant must meet the deposit requirements specified in Regulation 8 of SEBI RA Regulations, 2014.
  • Fit and Proper Criteria: The applicant, must be “fit and proper” as per the criteria listed in Schedule II of the SEBI (Intermediaries) Regulations, 2008.
  • Adequate Infrastructure: The applicant must have suitable infrastructure to effectively carry out research analyst activities.
  • Past Refusal of Registration: If the applicant or any connected person has previously been refused registration by SEBI, the reasons for such refusal will be considered.
  • Disciplinary History:Any past disciplinary action by SEBI or other regulatory authorities against the applicant or connected persons will also be examined.
  • Enlistment with a Recognised Body: The applicant must be enlisted with a body or body corporate recognised by SEBI under Regulation 14 of SEBI RA Regulations, 2014.

 

  • III Which exam should I take to become a SEBI Registered Research Analyst?
  • For becoming a SEBI registered research analyst:
  1. i. You must pass the NISM Series-XV: Research Analyst Certification Examination(Exam is held at Test Centre).
  2. ii. The certificate awarded upon successful completion is valid for three years.
  3. iii. To continue practising as a research analyst, it is mandatory to renew the certificate before its expiry. You can do so either by passing the NISM Series-XV: Research Analyst Certification Examination again or by clearing the NISM Series XV-B: Research Analyst Certification (Renewal) Examination(Exam is remotely proctored).

 

  1. IV How can I register for the NISM Research Analyst exam?

 

  1. V. What topics are covered in the NISM Research Analyst exam?
  • The NISM-Series-XV: Research Analyst Certification Examinationestablishes a minimum knowledge benchmark for individuals registered as Research Analysts under SEBI RA Regulations, 2014. The certification examination workbook covers essential topics such as:
    • Basics of Indian securities markets and key financial terminologies
    • Fundamental research approaches (top-down and bottom-up)
    • Microeconomic and macroeconomic analysis
    • Company analysis (qualitative and quantitative)
    • Risk, return, and valuation principles
    • Corporate actions and regulatory framework
    • Guidelines for writing effective research reports

 

The NISM Series XV-B: Research Analyst Certification (Renewal) Examination Examination includes advanced topics like:

  • Accounting quality assessment and red flag identification
  • Valuation catalysts and market trend analysis
  • Technical analysis and value migration in equity markets
  • Overview of derivatives and commodities markets

 

VI. How do I apply to SEBI for research analyst registration?

  • After clearing the above-mentioned NISM exam, you need to:
  1. i. Prepare necessary documents (application form, certificates, KYC, etc.)
  2. ii. Submit an application on SEBI’s intermediary portal: https://siportal.sebi.gov.in/intermediary/index.html
  3. iii. Pay the applicable registration fee, subject to 18% GST.
  4. iv. Await SEBI’s verification and approval.
  5. v. For Self-Registration, click here.

 

VII. What are the key responsibilities of a SEBI registered research analyst?

  • As per Regulation. 2(1) (wa) of SEBI RA Regulations, 2014, Research Analyst must perform Research Services such as:

Apart from the above, a research analyst must follow the Code of Conduct and Practices as specified by SEBI.

VIII. Is it mandatory to register with SEBI to work as a research analyst in India?

  • Yes As per SEBI RA Regulations, 2014, any Person and Entity offering research services in securities markets must be registered with SEBI.

 

IX. Where can I get more help and updates?

  • You can visit the official websites:
  1. i. SEBI – www.sebi.gov.in
  2. ii. NISM – https://www.nism.ac.in/certifications/

 

Author: Dr. Kiranjit Kaur Kalsi,
Sr. Assistant Manager – Centre for Content Creation

Why a Certificate in Financial Analytics is a Smart Investment

Posted on by Auburn Solutions

 

Unlocking the Future of Finance: Why a Certificate in Financial Analytics is a Smart Investment
In today’s data-driven economy, financial decisions are no longer guided by instincts alone. Whether you’re an aspiring analyst, a working finance professional, or someone looking to get into the financial domain, a certificate program in Financial Analytics offers a unique opportunity to harness the power of data and drive smarter financial strategies.

Financial analytics is the intersection of finance, data science, and technology. It involves collecting, processing, and analyzing financial data to support decisions related to investments, budgeting, forecasting, and risk management. From predicting market trends to evaluating the performance of financial instruments, financial analytics equips professionals with the tools to turn numbers into narratives and insights into impact.

What You’ll Learn
The Certificate Program in Financial Analytics is designed in collaboration with industry experts to ensure that the curriculum reflects the latest trends and tools in finance. Topics typically include:

  • Quantitative Methods in Finance
  • Financial Modeling and Portfolio Analysis
  • Risk Management and Derivatives
  • Credit Risk Analytics
  • Valuation and Risk Modeling

 

Career Opportunities
With companies across the globe looking for finance professionals who can interpret and analyze data, this certificate acts as a powerful credential. Roles you can pursue include:

  • Financial Analyst
  • Data-Driven Investment Advisor
  • Risk Analyst
  • Business Intelligence Analyst
  • FP&A Specialist

 

Flexible Learning Format
The programme could be offered in a hybrid/online format and is perfect for working professionals or students who want to learn without compromising their current commitments.

Who Should Enroll?

The participants of the program could be:

  • Graduates and Postgraduates in commerce, economics, statistics, or business
  • Working professionals in finance or accounting roles looking to upskill
  • Entrepreneurs and startup founders aiming to make data-backed financial decisions
  • Career switchers wanting to enter the high-demand world of fintech and analytics

 

Final Thoughts
Finance is evolving. Are you? The Certificate Program in Financial Analytics helps you stay ahead by combining financial acumen with analytical precision. It’s time to transform your career, make better decisions, and become future-ready.

Enroll now and take the first step toward becoming a financial analytics professional!

Author: Dr. Dhiraj Jain,

NISM’s CPFA:The Launchpad for High-Growth Roles in Finance and Analytics

Posted on by Auburn Solutions

 

As the financial industry undergoes a data-driven transformation, professionals who blend finance expertise with analytics acumen are becoming indispensable. Recognising this urgent need, National Institute of Securities Markets (NISM) offers the Certificate Programme in Financial Analytics (CPFA)—a rigorous and future-focused course designed to empower finance professionals with practical data handling, modeling, and interpretation skills that directly align with contemporary industry requirements.
Financial Analytics Professionals: Market Demand and Growth Trends

Metric / Segment Insight
Fintech Sector Demand for Data Talent 87% of Indian fintech companies seek candidates with financial + analytics skills
Share of Analytics Jobs from India 17.4% of global analytics job postings; highest worldwide
Average Salary for Financial Analysts in India ₹4–6 LPA (entry-level); ₹12–25 LPA (mid-to-senior level with analytics skillset)

Sources:

  1. NASSCOM. (2023, July 19). Fintech innovation in India: Demand for digital talent in the
    financial sector.Retrieved from https://community.nasscom.in/communities/emerging-tech/fintech-innovation-india-demand-digital-talent-financial-sector
  2. Times of India. (2024, February 10). India tops global demand for data analytics jobs. The Times of India. Retrieved from https://timesofindia.indiatimes.com/business/india-business/india-tops-global-demand-for-data-analytics-jobs/articleshow/113641351.cms
  3. PayScale.(2024).Financial analyst salary in India.Retrieved from https://www.payscale.com/research/IN/Job=Financial_Analyst/Salary

 

Why CPFA is the Need of the Hour: Bridging Finance with Data-Driven Insight
NISM’s Certificate Programme in Financial Analytics (CPFA) is designed to meet the growing industry demand for finance professionals with strong analytical skills. Through 160 hours of live, expert-led sessions, the programme offers practical training in financial modeling, credit analysis, valuation, and risk assessment using real-world data and case studies.

Participants gain hands-on experience with key tools like Python, R, Excel, and Power BI, preparing them for strategic, data-driven decision-making in today’s evolving financial landscape.

CPFA: Tailored to Industry Demands

Industry Requirement CPFA Programme Inclusion
Cross-functional finance + analytics skillset Integrated curriculum covering finance, statistics, Python/R, and visual analytics
Proficiency in analytical tools (Excel, Power BI, Python, R) Practical tool-based training with assignments and guided labs
Data visualization & storytelling Modules on interactive dashboards, business insights, and presentations
Risk and credit analytics Hands-on training in modelling, credit scoring, and financial forecasting
Real-world financial data application Exposure to real-time datasets and industry-simulated capstone projects
BFSI, Fintech, Consulting-ready profiles Curriculum aligned with recruitment trends across financial and analytics domains

Learning Objectives & Takeaways of CPFA Programme

Learning Objectives Key Learning Takeaways
Build strong fundamentals in financial markets, macroeconomics, and investment theory In-depth understanding of capital markets and financial instruments
Equip learners with hands-on knowledge of financial analytics tools and techniques Practical skills in Excel, Power BI, Python, R for modeling and data interpretation
Enable construction of financial models for valuation, forecasting, and portfolio analysis Ability to assess investment opportunities and construct optimized portfolios
Develop data-driven decision-making skills using real-world financial data Proficiency in credit risk analysis, predictive modeling, and scenario planning
Provide exposure to real-life financial datasets and cases Confidence in applying knowledge to industry-based capstone projects and simulations
Align learning outcomes with current BFSI and fintech industry demands Job-readiness for roles such as Financial Analyst, Risk Analyst, Business Intelligence Analyst

Career Pathways: Where CPFA Can Take You

Job Role Key Skills from CPFA Prospective Recruiter(s)
Financial Analyst Forecasting, Valuation, Excel, Market Analysis Investment Firms, NBFCs, AMCs
Risk Analyst Credit Risk Models, Basel Norms, Scenario Analysis Banks, Fintech, Rating Agencies
Investment Analyst Portfolio Construction, Equity Research, Financial Modeling PE/VC Firms, Asset Management
Financial Data Analyst Python, R, Power BI, SQL Fintech, Consulting, Analytics Startups
Business Intelligence Analyst Dashboarding, Visualization, Storytelling with Data Technology, BFSI, Corporate Strategy Teams
Quantitative Analyst Statistics, Regression, Risk Modeling Hedge Funds, Algorithmic Trading, Quants Roles

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

IPO Flipping, Risky Trading, and Debt: The Dangerous Game Young Indian Investors Are Playing

Posted on by Auburn Solutions

 

A new wave of retail trading is sweeping India’s markets, driven by the allure of quick wealth. Social-media “finfluencers” and familiar cognitive biases have spurred many young investors into speculative derivatives trading and IPO flipping. Encouraged by herd mentality, fear of missing out (FOMO) and overconfidence, inexperienced traders chase short-term gains instead of doing fundamental analysis.

Behavioral Drivers of Speculation

Investor psychology plays a key role. Young traders are prone to behavioral biases that amplify risk:

● Herd Mentality: Imitating the crowd. Many follow popular trades or tips from peers and influencers, rather than independent research. In markets, this can fuel asset bubbles and panic sell-offs as everyone chases the same idea.

● Fear of Missing Out (FOMO): Jumping into hype. The fear of missing a booming rally can prompt impulsive entries at overheated prices. Traders may buy simply because others are doing so, hoping to “ride the wave” before it’s too late.

● Disposition Effect: Selling winners too soon and hanging on to losers. Behavioral finance studies define the disposition effect as the tendency to cash out profitable positions quickly while avoiding realization of losses. Many young investors thus lock in small gains from an IPO listing, yet hold onto or even double down on stocks that have fallen, hoping to “break even.”

● Overconfidence: Overestimating skill or information. Novice traders often believe they can time the market or pick high returns based on limited research. This leads to excessive trading and underestimating the difficulty of speculation.

These biases feed directly into two popular strategies: leveraged derivatives trading and IPO flipping. Derivatives allow large bets with borrowed funds, magnifying gains and losses. IPO flipping refers to subscribing to a new issue solely to sell it quickly at the initial pop, instead of investing for the company’s fundamentals. Both practices expose the uninformed to huge downside if markets reverse.

Market Data and Trading Outcomes

Empirical market data confirm this speculative frenzy among youth:

● Intraday Trading Spike: Between 2022 and 2024, the count of intraday traders in India rose by about 5 times, with nearly 48% of new entrants under 30. Despite the hype, 93% of the 1.13 crore intraday traders during this period incurred net losses. In aggregate these traders lost ~Rs 1.8 lakh crore. (Put differently, the typical young trader making ~Rs 5 lakh annually burned through ~Rs 2 lakh on average.)

● Retail IPO Activity: The post-pandemic period saw a flood of first-time investors into IPOs. Nearly half of all demat accounts active in 2021–23 IPO subscriptions were opened after the COVID lockdowns. Meanwhile, demand from Non-Institutional Investors (NIIs) which typically experienced high-net-worth participants sharply declined, with NII oversubscription ratios falling from ~38 times to ~17 times. This suggests retail bidders (many young and unsophisticated) crowded the IPO market even as veterans pulled back.

● IPO Listing Returns: Analysis of IPOs listed Dec 2024 to Mar 2025 (80 issues total) reveals a speculative tilt. Of these, 57 IPOs opened with hefty gains (average listing jump of more than 40%), 9 opened roughly flat (0% gain), and 14 opened at a loss (average -12.5%). Half of the IPO shares allotted to retail investors were sold within one week, underscoring the “flip” mentality. In effect, many young subscribers captured initial listing profits and immediately exited, rather than holding for long-term value.

These figures paint a clear picture: young retail investors are overwhelmingly chasing immediate gains, often neglecting basic due diligence on company fundamentals. The short-term focus inflates listing prices and lures novices into chasing bubbles, only to suffer losses when momentum fades.
Financing Speculation through NBFC Loans

A critical question is how modest-income investors fund such aggressive trading. Industry reports suggest a key role for non-bank personal loans. The Fintech Association for Consumer Empowerment (FACE) found that in FY2023 to FY2024 NBFCs sanctioned nearly 14 crore personal loans, totaling about Rs 9 lakh crore. This explosive growth reflects the appeal of instant, often uncollateralized credit in the digital age.

Notably, these loans come at very high interest. Banks typically offer personal loans at around 11% per annum, whereas NBFC and fintech lenders charge up to 45%. The gap is stark and those with weak credit scores or urgent funding needs may be shut out by banks’ stringent criteria, so they turn to NBFCs’ fast, frictionless apps. In other words, subprime borrowers and desperate traders accept exorbitant rates in exchange for quick approvals.

This cycle of high-cost borrowing exacerbates losses. Young traders may borrow to cover losing trades or to leverage up for new bets. When trades go south, they re-borrow to recoup losses, perpetuating a debt spiral. RBI’s latest Financial Stability Report (Sep 2024) sounds the alarm: India’s bank NPAs are at a 12-year low (3.12% as of Sept 2024) thanks to a lending boom, but NBFCs remain vulnerable. The report highlights that NBFCs continue to have comparatively higher NPA levels due to their exposure to unsecured personal loans, and that unsecured lending by NBFCs is growing in double digits. In short, risk is accumulating on NBFC balance sheets. Many young traders could find themselves burdened by unmanageable debt as losses mount, threatening both household finances and NBFC stability.

Policy Imperatives and Institutional Responses

Addressing this multifaceted crisis requires coordinated action on several fronts:

1. Regulatory Strengthening of NBFC Lending: Regulators should tighten underwriting norms for personal loans, especially those lacking collateral or directed toward market speculation. For example, imposing risk-based credit assessment and end-use verification (requiring lenders to monitor whether a loan is used for trading) would help curb predatory NBFC practices. Enhanced supervision and higher provisioning for risky loan portfolios can protect lenders and borrowers alike. Similarly, measures like margin requirements or cooling-off periods for IPO subscriptions and derivatives to limit excessive leverage and speculative “flipping.”

2. Investor Education and Behavioural Finance Training: Long-term change hinges on smarter investors. Thus, India’s securities markets education body should play a pivotal role by developing modules on behavioural biases, risk management, and fundamental analysis. For instance, training programs could highlight common traps (FOMO, overconfidence, disposition effect) and reinforce the importance of scrutinizing business models and financials before investing. Equipping young traders with robust financial literacy will promote discipline. Embedding behavioural finance in certification courses and college curricula would help inoculate new investors against herd-driven mania.

3. Data-Driven Market Surveillance: RBI should leverage data analytics to detect early signs of speculative bubbles and risky credit flows. Real-time data-sharing between stock exchanges, brokerages and credit registries could flag anomalous trading patterns or a surge in margin / loan usage tied to market investments. Advanced algorithms and machine learning can monitor retail trading volumes, concentration of holdings, and velocity of IPO exits. Such surveillance would enable regulators to pre-empt systemic stress and adjust policies dynamically.

Conclusion

The convergence of social-media hype, behavioural biases and easy-but-costly credit has created a perilous environment for young investors in India. The evidence is unmistakable: a majority of inexperienced traders are losing hard-earned money on short-term bets, often funded by unsustainable loans. Beyond the personal toll on households, this trend poses broader financial stability risks (e.g. rising NBFC NPAs).

Institutional responses must therefore be two-pronged: tighten the credit and trading loopholes that fuel reckless speculation, and elevate the investment acumen of retail participants. Regulatory measures can curb obvious excesses, but ultimately sustainable markets depend on an informed investor base that prioritizes long-term value. By instilling prudent decision-making habits and emphasizing fundamentals over frenzy, we can help steer investors away from the dangerous cycle of quick gains and crushing losses and towards disciplined wealth creation.

Authors:

● Abhishek Dadhwal, PGP Student, Indian Institute of Management Raipur
● Rasmeet Kohli, Sr. AGM, National Institute of Securities Markets (NISM) .
● Pradiptarathi Panda, Asst. Professor, Indian Institute of Management Raipur

Disclaimer: The views expressed above are those of the authors alone and do not represent the views of NISM or affiliated institutions.
The piece had originally appeared in Live Mint.

The Crossover Point in your Journey to Financial Independence

Posted on by Auburn Solutions

 

One of the earliest books I read on how to achieve financial independence was “Your Money or Your Life” by Vicki Robin and Joe Dominguez, which continues to be an international bestseller. It was here I stumbled across the term “the crossover point”. In the journey to financial independence the crossover point is a simple and powerful idea. It is the moment when your passive income surpasses your living expenses, signifying a profound shift from “when you work for money” to “when money works for you”. Getting to the crossover point could be a pivotal point in your life because it means that you can now be financially independent.

Living expenses encompass everything from housing, food, transportation, healthcare and entertainment. Today it has become easier to track your expenses as most payments are made digitally. Passive income refers to the money you earn from sources that require an initial investment and continue to generate steady income. As opposed to this, active income would be income earned from working a job or running a business. Passive income would include interest income from FDs and bonds, dividends from mutual funds and equity shares, rental income etc.

The point where your living expenses line and your passive income line intersect is your crossover point. The crossover point is significant as it offers immense psychological liberation because the pressure to work for money diminishes. This freedom leads to reduced stress and improved wellbeing. As Robin and Dominguez say in the book:

The crossover point provides us with our final definition of Financial Independence. At the crossover point, where monthly investment income crosses above monthly expenses, you will be financially independent in the traditional sense of the term. You will have a safe, steady income for life from a source other than a job.

 

The crossover point provides a powerful feedback loop for your financial strategy. It demonstrates that your investment efforts are being fruitful. It also signifies a shift in your financial engine. Before the crossover point your primary engine for wealth creation is your active income. After the crossover point it is your investment portfolio that is the dominant engine for wealth creation.

It is also important for you to be aware of how much you need to invest to exceed the crossover point – what your crossover assets should be. This is a fairly simple calculation, as illustrated below:

Investment Income = Crossover assets x Investment Returns

At the crossover point your investment income is equal to your expenses. Therefore, the above formula can be rewritten as:

Expenses = Crossover assets x Investment Returns or

Crossover assets = Expenses/Investment Returns

If your annual expenses are ₹ 6,00,000 (a monthly expense of  ₹ 50,000) and you expected investment return is 8%, then the investable assets you will need to reach your crossover point is ₹6,00,000/8% or ₹75 lakhs.

The truly empowering shift in the pursuit of financial freedom will happen when you build up this investment corpus.

Author: Sashi Krishnan,

Director NISM

 

Mutual Funds: Money’s Passport to Growth

Posted on by Auburn Solutions

 

Imagine you have Rs 10,000 cash lying idle in your savings bank account. You want to invest. Opening a Fixed deposit is not a thing for Gen-Z, and the stock market feels like a roller coaster ride of many ups and downs. So, what if there is a middle path to achieve financial freedom, with having experts looking after your investments, tailored to your goals to achieve your “Financial Nirvana”.

Yes, Mutual Funds are the right investment vehicle, where you can park your surplus money and also enjoy returns that will outpace the inflation rate.

Understanding Mutual Funds:

A Mutual fund is a financial product that pools the money of the investors. Fund Manager takes that money and invests it in a diversified portfolio of stocks, gold, bonds, or even the international market, depending on the objectives of the Fund. So, it provides an opportunity with lower risk instead of putting all your eggs in one basket (say, just one stock), your money gets spread across many. Each investor holds units of the fund, representing their proportionate share of the fund’s holdings. The value of these units is determined by the Net Asset Value (NAV), which fluctuates based on the performance of the underlying securities.

 

Types of Mutual Funds: Finding Your Investment Match

Category How It Feels Ideal For
Equity Funds Like a thrilling adventure — high risk, high reward Long-term wealth creation
Debt Funds A calm and steady ride Risk-averse or conservative investors
Hybrid Funds A mix of smooth and bumpy roads ️ Those seeking a balance of risk and stability
ELSS (Tax-Saving Funds) Like earning cashback while spending Saving taxes while growing your investment

Are Mutual Funds Risky?

Yes, market fluctuations can affect your mutual fund’s value. However, when you invest with a long-term perspective, mutual funds have historically outperformed traditional options like fixed deposits and savings accounts. Patience and planning are key.

Smart Tips Before You Invest

  • Define Your Financial Goal: Are you saving for a car in 3 years or planning for retirement in 20 years? Your goal will determine the type of fund you need. It could be Equity, Debt, or Hybrid.
  • Check Fund Ratings: Use trusted platforms to assess fund performance and credibility.
  • Avoid Panic Selling: Markets are volatile in the short term. Stay invested for the long run to ride out the ups and downs.
  • Start a SIP (Systematic Investment Plan): A disciplined approach that averages out market highs and lows — perfect for consistent, stress-free investing.
  • Don’t Chase Last Year’s Stars: Instead of focusing on last year’s top performers, look for funds with steady returns over 5–10 years.
  • Know Your Fund Type:
    • Small Cap Funds = High risk, high reward
    • Mid-Cap Funds = Average risk and average returns
    • Liquid Funds = Low risk, ideal for short-term goals or parking idle cash
  • Watch the Expense Ratio: This is the fee charged by the fund house. A lower expense ratio means more returns in your pocket.
  • Choose Direct Plans: Direct plans may offer higher returns. However, it could be risky without proper research and guidance, so choose wisely.
  • Upgrade Your SIP Over Time: Got a salary hike? Use the SIP Top-Up feature to automatically increase your investment each year. It’s like giving your future a raise!
  • Emergency Fund Comes First: Before investing, set aside 5–6 months of expenses in a liquid fund or savings account. It acts as a safety net during unexpected situations.

 

Final Word: Are Mutual Funds Really “Sahi”?

Absolutely — but only when selected wisely. Mutual funds are among the most efficient tools for long-term wealth generation. They’re not get-rich-quick schemes but disciplined vehicles for financial growth.

Let your mutual fund be your co-pilot — helping your money grow quietly while you sleep.

Vikas Garg
Assistant Manager
Centre for Content Creation (CCC)
National Institute of Securities Markets (NISM)

Financial Planning: A Journey to Financial Freedom, Security, and Prosperity

Posted on by Auburn Solutions

 

Financial Planning: A Journey to Financial Freedom, Security, and Prosperity

Financial Planning is a common term, yet uncommon for many. It is more than just managing the money, but investing in the future to achieve short-term and long-term goals. In today’s dynamic environment, a robust financial plan is a necessity of the hour. Whether you aim to purchase your dream home, dream car, fund your child’s education, or ensure your relaxing and soothing retirement, a well-researched and structured financial plan serves as a solution to your financial goals and aspirations. It provides clarity and helps us to make informed decisions and pave the way for a secure and sustainable future.

The term Financial Planning

In our everyday life, we often listen to the words “Financial Planning,” but what is the real meaning of it? Financial Planning involves assessing your current financial health, setting up achievable goals, and creating a strategy for fulfilling those goals. It includes various aspects, including:

  • Budgeting
  • Managing expenses
  • Developing saving habits
  • Investing
  • Planning for taxes

The primary objective is to ensure that you have enough resources to align your financial needs and aspirations.

Arvind’s Story: From Financial Chaos to Control

In 2018, at 28, Arvind Sharma seemed to have it all — a lucrative job in Pune’s IT sector, a brand-new bike, regular online shopping sprees, weekend outings, and even trips to Goa. His Instagram was filled with flashy snapshots of this lifestyle. But underneath the social media sheen was a stark reality: Arvind had no savings, no insurance, and no investments — just a pile of EMIs and bills. Financial planning had never crossed his mind.

The Turning Point

In 2020, when the pandemic struck, his company slashed salaries. That’s when reality hit hard. With just ₹4,780 in his bank account and no backup, Arvind was forced to confront his financial vulnerability. “What if I lose my job?” he wondered. This moment became the start of his financial transformation.

Step-by-Step: Arvind’s Financial Makeover

  • Step 1: A Hard Look at Spending
    • Food delivery: ₹6,000/month
    • Unused subscriptions: ₹1,200/month
    • Credit card payments: ₹15,000/month
    • Rent: ₹15,000/month
    • Groceries: ₹12,000/month
    • Shopping: ₹15,000/month
    • Travel: ₹15,000/month
    • Savings & Investments: Zero
  • Step 2: Learning the Basics
    • Budgeting gives freedom, not restriction.
    • Emergency funds are essential.
    • Insurance protects, it doesn’t burden.
    • Investing is necessary to stay ahead of inflation.
    • Financial planning is a form of life planning.
  • Step 3: Budgeting with the 50-30-20 Rule
    • 50% for needs (rent, food, EMIs)
    • 30% for wants (entertainment, lifestyle)
    • 20% for savings and investments
  • Step 4: Creating an Emergency FundHe allocated ₹2,00,000 into a liquid mutual fund, enough for three months of expenses. Pro Tip: Emergency funds are like umbrellas — you may not need them every day, but they’re indispensable when it rains.
  • Step 5: Getting Insured
    • Term life insurance of ₹1 crore or more, depending upon the need.
    • Health insurance worth ₹25 lakhs covering him and his family
  • Step 6: Smart Investing through SIPs
    • ₹5,000/month in ELSS for tax benefits
    • ₹4,000/month in equity mutual funds for long-term growth
    • ₹2,000/month in hybrid funds for mid-term goals
  • Step 7: Behavioural Changes
    • Stopped EMI-financed gadgets
    • Avoided peer pressure for expensive outings
    • Resisted tempting but unnecessary sales

Where Arvind Stands Today

  • ₹3.9 lakhs in mutual fund investments (approx.)
  • ₹2,00,000 in emergency savings
  • Comprehensive insurance coverage
  • Peace of mind

“I don’t stress about money anymore. I take charge of it now — that’s the power of financial planning.”

Lessons from Arvind’s Journey

  • Start Small, Start Now – Don’t wait for a big salary to begin.
  • Plan, Don’t Just Earn – Income without planning leads nowhere.
  • Automate Savings – Treat saving like a bill to be paid, not a leftover.
  • Secure, Then Grow – Get insured and build your emergency cushion first.
  • Track and Tweak – Financial planning is a continuous process, not a one-time task.

Vikas Garg
Assistant Manager
Centre for Content Creation (CCC)
National Institute of Securities Markets (NISM)

Disclaimer: The story narrated above by the writer is intended solely for educational and informational purposes. It doesn’t represent the views of the NISM. Readers are advised to consult SEBI-registered Investment Advisors before making investments or financial decisions.

How to crack NISM’s Alternative Investment Fund Managers Exams

Posted on by Auburn Solutions

NISM currently offers 3 Alternative Investment Fund (AIF) Certification Examinations for Fund Managers. This article will try to address the rationale for 3 AIF Managers exams, the differences among these 3 exams and some common queries that learners may have.

The first AIF Manager Exam was launched in January 17, 2024 by NISM. It is known as NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination. The need for this Certification Examination originated from the requirement by SEBI to create a common minimum knowledge benchmark for AIF Managers and its key investment team. Through a circular dated May 13, 2024, SEBI mandated that at least 1 person from the Key Investment Team of an AIF Manager should have relevant certification (as one of the criteria) in order to obtain certificate of registration as an AIF. Series-XIX-C: AIF Managers Certification Examination focuses on fund management aspects of all three categories of AIFs.

An AIF Manager may have relevant educational qualifications, such as, CA, MBA, Post-Graduation etc, and even have experience managing funds; but this may still not be enough to know the basics of Fund Management activities of an AIF as this Industry is unique and developing rapidly since the last decade. Ticket sizes for investment are much higher, typically starting at Rs 1 crore, handling a class of sophisticated investors who have higher return expectations. Further, AIFs invest in unlisted private markets and thus the level of complexities and risks involved are also higher. The mechanics of dividend distribution, cash flows and return metrics, apart from taxation and fund governance, are also unique in nature and quite distinct from processes followed by other pooled investment vehicles. For all these reasons, SEBI rightly was concerned on ensuring that the AIF Managers be equipped with adequate knowledge to manage AIFs efficiently.

However, this exam is not just for AIF Investment Team personnel but also for anyone interested to know the workings of an AIF or want to make a career in the fast-growing AIF Industry.
Last year before I joined NISM, I was fascinated to know more about AIFs. Having spent more than 2 decades in the Mutual Fund Industry, I felt the AIF Industry might be a natural career progression for me or at the very least I should know more about this industry. Upskilling and enhancing knowledge in a fast-changing world is important for anyone and with time at my disposal, I decided to appear for an Exam after nearly 25 years! Listing below a few learnings from my own experience of appearing for the exam.

  • Do not rush into enrolling and appearing for the Exam before reading the study material thoroughly. Since the workbook runs into more than 550 pages, it would be wise to read all chapters, if required even twice or thrice before attempting the exam.
  • Do focus a bit more on the chapters with higher weightages and those from where case studies can likely be asked. There are illustrative examples given within the various chapters and one can practice these examples repeatedly to understand the calculations.
  • Ensure to use excel and practice the excel formula-based concepts mentioned in the workbook so that you are comfortable using the same in the exam too.
  • Keep in mind the aspect of negative marking (25%), so avoid wild guesses.

 

While Series-XIX-C made its debut in January 2024, and became mandatory vide the SEBI Circular published in May 2024 (with a deadline of 9th May 2025 to clear the exam), In a recent development, Industry Associations represented to SEBI to provide an option to split the categories as it was felt that most AIFs either manage Category I and II AIFs or Category III AIFs. Accordingly, NISM was tasked by SEBI to create and launch two separate examinations, one for only Category I and II AIFs and another for Category III AIFs. On May 1, 2025, NISM launched Series-XIX-D: Category I and II AIF Managers and Series-XIX-E: Category III AIF Managers Certification Examinations.

Candidates who have already cleared Series-XIX-C are not required to again take Series-XIX-D or Series-XIX-E exams. The key question many have is whether they can take Series-XIX-D or Series-XIX-E in lieu of Series-XIX-C for meeting the SEBI requirement. A formal Gazette notification needs to be issued by SEBI to mandate these 2 exams (i.e. Series-XIX-D and Series-XIX-E), so that these examinations are also considered as the requisite certifications for respective AIF categories. As on end of May 2025, such notification is awaited.

Meanwhile SEBI has also provided an extension in the date to clear Series-XIX-C Certification Examination from the earlier May 9, 2025 to July 31, 2025 based on representations from Industry bodies and to ease burden of compliance.

The workbooks of Series-XIX-D and Series-XIX-E are expectedly smaller in size in terms of number of pages. XIX D is about 390 pages and XIX E about 445 pages. The test duration is also revised: 2 hrs for each exam, whereas Series-XIX-C is of 3 hrs. Similarly, the number of questions is also lesser: 80 questions each instead of 120 questions. So, its good news for learners who want to study for only Category I and II or Category III rather than studying all 3 categories together. However, from an overall knowledge perspective I would still urge those who want to make a career in the AIF industry, know more about AIFs or even investors who may invest across all Categories of AIFs to take the comprehensive Series-XIX-C exam.

Like other NISM workbooks, the AIF Manager study material may also undergo periodic revisions to incorporate new/modified regulations, changes in taxation, fund management aspects etc. Thus, it is always advisable to download the study material from NISM website and check the Workbook version mentioned in the beginning of the workbook so that one studies the most recent one. NISM study materials are freely downloadable from the NISM website at: https://api.nism.ac.in/cmp/

For a detailed understanding of these 3 AIF Managers examinations, please refer to the following:

 

Author,
Ms. Bekxy Kuriakose
GM – Content, NISM

The curve steepens: RBI’s rate bonanza impact on g-sec prices

Posted on by Auburn Solutions


Under the Chairmanship of Shri Sanjay Malhotra, the RBI MPC (Monetary Policy Committee) delivered a higher than expected 50 bps cut in the policy repo rate from 6% to 5.50% at conclusion of its meeting on June 6th 2025. The last time RBI cut rates by 50 bps was about 10 years back in Sept 2015 (from 7.25% to 6.75%). This recent 50 bps cut is the most significant reduction since the emergency easing of 75 bps during the COVID-19 pandemic in March 2020. Five out of six members voted in favour of 50bps cut in policy repo rate while one member voted for a 25bps cut

The key reasons for the cut were to boost private consumption and investment. And RBI decided to frontload the rate cut given the significant softening in inflation over past six months and lower than expected growth conditions. The domestic GDP growth projections maybe impacted by uncertain global growth outlook and weak sentiments in backdrop of tariff disputes, weather uncertainties and geopolitical tensions. While real GDP growth for Fy 25-26 is projected at 6.5%, CPI for same period is projected at 3.7%.

And that was not all. RBI also decided to cut the CRR (Cash Reserve Ratio) by 100bps in 4 tranches of 25bps each (with effect from the 4 weeks beginning September 6, October 4, November 1 and November 29, 2025). This is expected to release extra liquidity of Rs 2.5 lakh crores by December 2025 into the banking system.

And to top it all given all this frontloading rate action, RBI decided to change its monetary policy stance from “accommodative” to “neutral”. The RBI Governor indicated that the space for future rate cuts is quite limited. This probably was the disappointing factor for the g sec traders at the long end considering that 25 bps cut was already factored in.

The market was expecting a 25 bps rate cut but all the above rate action alongwith the change in stance led to volatility in gsec (government security) prices post the RBI announcement on June 6th. Initially prices rose (and yields fell), however towards the end of day there was a selloff and the 10 yr benchmark gsec yield ended at 6.29%, 5 bps higher than the previous day close of 6.24%. The 15 yr benchmark gsec ended at 6.50%, 9 bps higher than previous day close. On the other hand, the 5 yr benchmark gsec ended at 5.82%, 2 bps lower than the previous day close of 5.84%.

This is thus clear evidence of steepening of the yield curve with the long end yields having gone up and the short end of the yield curve softening at the margin. The short end gsec prices would also be impacted positively by the liquidity infusion through the CRR cut which would come in the months ahead.

We are just a day in post the Monetary policy. The overall environment remains conducive for gsec prices to go higher. However most of the good news of the rate cuts may already be factored in.

Ms. Bekxy Kuriakose, 
GM – Content, NISM 

© 2025 National Institute of Securities Markets (NISM). All rights reserved.

Privacy Policy Disclaimer