Noesis
Level 2 — RecallIndian Market Specifics

Indian Market Specifics

⏱ 30 minutes40 marksprintable — key stays hidden on paper

Level 2 (Recall): Definitions, Standard Problems, Short Derivations

Time Limit: 30 minutes
Total Marks: 40

Instructions: Answer all questions. Show working for numerical questions. Use ₹ for currency. All rates as per standard Indian regulations (equity delivery/intraday/F&O norms).

Q1. Define the roles of NSE and BSE in the Indian securities market. State which is older and name the flagship index of each. (4 marks)

Q2. What is SEBI? List three functions of SEBI related to investor protection. (4 marks)

Q3. Explain the terms circuit filter and F&O ban period. What triggers a stock's entry into the ban period in the F&O segment? (4 marks)

Q4. State the current STT rates for the following and compute the STT: (a) An equity delivery buy and sell transaction, each of value ₹2,00,000. STT is 0.1% on both buy and sell. (b) An equity intraday sell of value ₹5,00,000. STT is 0.025% on the sell side only. (5 marks)

Q5. Distinguish between Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) for listed equity shares. State the holding period cut-off and the applicable tax rates. (5 marks)

Q6. A trader buys 1 lot of NIFTY futures. Given lot size = 50 and index price = 22,000, calculate the contract value. If the exchange requires a SPAN + Exposure margin of 12%, what margin must the trader deposit? (4 marks)

Q7. Explain how taxation of intraday equity trading and F&O trading differs from delivery-based investing. Under which head is F&O income classified? (4 marks)

Q8. Define ASM and GSM surveillance frameworks. State one purpose of each. (4 marks)

Q9. An investor sells listed shares held for 2 years. Purchase cost = ₹1,50,000; sale value = ₹3,00,000. Assuming the ₹1,25,000 LTCG exemption applies, calculate the taxable LTCG and the tax payable at 12.5%. (4 marks)

Q10. List the weekly expiry index products available in India and state the concept of grandfathering in LTCG. (2 marks)

End of Paper

Answer keyMark scheme & solutions

Q1. (4 marks)

  • NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are India's two primary stock exchanges facilitating trading in equities, derivatives, and other instruments. (1)
  • BSE is older — established 1875; Asia's oldest exchange. NSE established 1992. (1)
  • BSE flagship index: SENSEX (30 stocks). (1)
  • NSE flagship index: NIFTY 50 (50 stocks). (1)

Q2. (4 marks)

  • SEBI = Securities and Exchange Board of India, the statutory regulator of the securities market (established 1992). (1)
  • Three investor-protection functions (1 mark each, any three):
    • Framing regulations to prevent fraud, insider trading, and market manipulation. (1)
    • Mandating disclosure and transparency by listed companies. (1)
    • Running investor grievance redressal (e.g., SCORES platform) and investor education. (1)

Q3. (4 marks)

  • Circuit filter: a price band (upper/lower limit) beyond which a stock/index cannot move in a day, halting trading to curb volatility. (1.5)
  • F&O ban period: a stock enters ban when open interest crosses a limit, restricting fresh positions. (1.5)
  • Trigger: when aggregate market-wide open interest (MWPL) exceeds 95% of the permitted limit; only position-reducing trades are then allowed. (1)

Q4. (5 marks) (a) Delivery: STT = 0.1% on buy + 0.1% on sell.

  • Buy STT = 0.001 × 2,00,000 = ₹200 (1)
  • Sell STT = 0.001 × 2,00,000 = ₹200 (1)
  • Total = ₹400 (1)

(b) Intraday sell: STT = 0.025% on sell only.

  • STT = 0.00025 × 5,00,000 = ₹125 (2)

Q5. (5 marks)

  • Holding period cut-off for listed equity = 12 months. (1)
  • Held ≤ 12 months → STCG; taxed at 15% (Section 111A). (1.5) (Note: 20% for transfers on/after 23 Jul 2024; accept 15% or 20% with reasoning.)
  • Held > 12 months → LTCG; taxed at 12.5% on gains above ₹1,25,000 exemption (10% pre-Jul 2024). (1.5)
  • STCG applies to short holding (speculative/short horizon); LTCG rewards long holding with lower rate and exemption. (1)

Q6. (4 marks)

  • Contract value = lot size × index price = 50 × 22,000 = ₹11,00,000. (2)
  • Margin = 12% × 11,00,000 = ₹1,32,000. (2)

Q7. (4 marks)

  • Delivery investing → capital gains (STCG/LTCG). (1)
  • Intraday equity → treated as speculative business income. (1)
  • F&O trading → non-speculative business income. (1)
  • Both intraday and F&O are reported under "Profits and Gains from Business or Profession (PGBP)" and taxed at slab rates; expenses deductible. (1)

Q8. (4 marks)

  • ASM = Additional Surveillance Measure: framework for stocks showing abnormal price/volume; may add extra margin. Purpose: curb excessive speculation/volatility. (2)
  • GSM = Graded Surveillance Measure: applied to stocks with weak fundamentals / abnormal price rise. Purpose: protect investors by restricting trading (e.g., periodic call auction, higher margins). (2)

Q9. (4 marks)

  • Gross LTCG = 3,00,000 − 1,50,000 = ₹1,50,000 (1.5)
  • Taxable LTCG after exemption = 1,50,000 − 1,25,000 = ₹25,000 (1.5)
  • Tax = 12.5% × 25,000 = ₹3,125 (1)

Q10. (2 marks)

  • Weekly expiry index products: NIFTY 50 (and historically Bank Nifty, FinNifty, Midcap Nifty, Sensex — accept any valid). (1)
  • Grandfathering: for LTCG, gains accrued up to 31 Jan 2018 on equity are exempt; cost of acquisition is taken as the higher of actual cost or the 31-Jan-2018 fair market value. (1)
[
  {"claim":"Q4a total delivery STT is 400", "code":"buy=0.001*200000; sell=0.001*200000; result=(buy+sell==400)"},
  {"claim":"Q4b intraday sell STT is 125", "code":"stt=0.00025*500000; result=(stt==125)"},
  {"claim":"Q6 contract value 1100000 and margin 132000", "code":"cv=50*22000; m=0.12*cv; result=(cv==1100000 and m==132000)"},
  {"claim":"Q9 taxable LTCG 25000 and tax 3125", "code":"g=300000-150000; t=g-125000; tax=0.125*t; result=(t==25000 and tax==3125)"}
]