NISM Series X-A: Investment Adviser (Level 1) Cert. 'Case Study 3'

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NISM Series X-A: Investment Adviser (Level 1) Case study-3

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Mr. Kumar, a Non-Resident Indian (NRI), currently resides abroad while his wife and children remain in India. During his time as an Indian resident, Mr. Kumar had invested in a diversified portfolio. Now, he wishes to continue his investment activities by sending money from abroad and is committed to complying with all regulatory requirements.

In the past, when Mr. Kumar was in India, he had made investments in the names of his children, for which he was the guardian. His older son has now reached the age of 18 and is considered a legal adult. Mr. Kumar aims to continue these investments in his children’s names and is interested in executing a general Power of Attorney (PoA) in favor of his wife to facilitate and oversee the necessary transactions.

Q)Mr. Kumar is interested in making his existing investments in the resident Demat account to be available for use for his wife in India. For this, he wants to add his wife as the Joint holder in the Trading and Demat account. Guide him on the procedure to do this.

a) He will have to open a new NRO Demat Account with wife as resident joint holder

b) Simply instruct the Depository for adding the joint holder and his wife will be added after doing the KYC

c) To make his wife as a joint holder, she has to be first made a joint holder in the trading account which is linked to the bank account

d) A NRI Demat account cannot have a joint holder so it will not be possible to add his wife as joint holder

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Mr. Kumar, currently a Non-Resident Indian (NRI), resides abroad while his wife and children live in India. During his time as an Indian resident, Mr. Kumar had diversified investments. Now, he wishes to continue his investment activities by sending money from abroad, ensuring compliance with all regulatory requirements.

While in India, Mr. Kumar had invested in his children’s names, acting as their guardian. Since his older son has now turned 18 and is considered a legal adult, Mr. Kumar aims to sustain these investments in his children’s names. To facilitate and oversee the necessary transactions, he intends to execute a general Power of Attorney (PoA) in favor of his wife.

Q)Mr. Kumar is interested in executing a Power of Attorney (PoA) but as he is busy, he is unable to come to India. Which action should Mr. Kumar consider ?

a) A PoA has to be executed in India and so Mr. Kumar has to come to India or he will be unable to execute the PoA

b) The Grantor and Attorney of PoA must be present for signing and so Mr. Kumar and his wife will have to be physically be present at the same place

c) Mr. Kumar can get the PoA drafted abroad, sign it and get it attested. He has to then send it to his wife in India for signature, stamping and notarising

d) A PoA has to be executed at the place where the assets are held. So Mr. Kumar and his wife will have to be present there

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Mr. Kumar is an Indian living abroad, and although he is not currently in India, his wife and kids are. Back when he lived in India, he invested in various things. Now, he wants to keep investing from another country and make sure he follows all the rules. In the past, he invested in his kids’ names when they were younger, and he was the one in charge. Now, his older son is an adult, and Mr. Kumar wants to keep investing in his kids’ names. To do this, he plans to give his wife the power to handle the transactions through a document called a general Power of Attorney (PoA).
Q)There are some investments in mutual funds in the now major son’s name. As these have shown good appreciation, they have to be sold. Mr. Kumar cannot come to India for the next 9 months. How should he proceed ?

a) As Mr. Kumar had made the investment as a Guardian, only he can redeem the mutual fund units

b) Since Mr. Kumar's son is now a major, the son can now operate the account after completing the necessary formalities regarding change of status from minor to major

c) Mr. Kumar can give a PoA to his wife and she can redeem the mutual fund units

d) Mr. Kumar can give a PoA to his now major son and he can redeem the mutual fund units

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Q) Mr. Kumar wants to continue investing for his now major son through account of Mr.Kumar. Identify which formalities are required for this ?

a) Since Mr. Kumar's son is now a major, Kumar cannot make investments since third party investments are not allowed

b) Since Mr. Kumar's son is now a major, he can now complete the KYC formalities but he need not provide the PAN card details, bank account details etc. as the funds will be of Mr. Kumar

c) As the funds will be coming from Mr. Kumar, he will have to undergo the KYC formalities and provide his PAN card and bank account details

d) Since the investments were made as a minor and the account is operational, no new formalities will have to be completed

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Mr. A is a careful investor interested in putting money into the stock market. He’s currently checking out shares of VKP Ltd. The company has a PE ratio of 22, a PEG ratio of 0.98, and a dividend yield of 3.5. Now, let’s answer some questions using this information.
Q)The PEG ratio of the company classifies it as_________

a) Overvalued

b) Undervalued

c) Low growth stock

d) High growth stock

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Mr. A is a careful investor interested in putting money into the stock market. He’s currently checking out shares of VKP Ltd. The company has a PE ratio of 22, a PEG ratio of 0.98, and a dividend yield of 3.5. Now, let’s answer some questions using this information.
Q)Mr. A is attracted by the high dividend yield of the stock. Which of the following is a likely feature of the investment going forward?

a) High capital appreciation

b) Low dividend payout

c) Low earnings growth

d) High growth in EPS

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Mr. A is a careful investor interested in putting money into the stock market. He’s currently checking out shares of VKP Ltd. The company has a PE ratio of 22, a PEG ratio of 0.98, and a dividend yield of 3.5. Now, let’s answer some questions using this information.
Q)Which of the following may make VKP Ltd unsuitable for Mr. A as a conservative investor?

a) PEG ratio lower than 1

b) PE ratio higher than peer average

c) Higher Dividend Yield

d) PEG greater than 3

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Q)What does the price/earnings (PE) ratio measure?

a) The multiple that the stock market places on a companys earnings

b) The number of times that dividends paid are covered by profits

c) The return received by way of dividends as a percentage of current share price

d) The amount of profits available to ordinary shareholders

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Q)What does PEG ratio less than 1 signify?

a) It means that the market is valuing a stock in accordance with the stock's estimated EPS growth.

b) It means that EPS growth is potentially able to surpass the market's current valuation and the stock's price is undervalued.

c) That the stock is currently correctly priced in the market

d) It means that EPS growth is potentially able to surpass the market's current valuation and the stock's price is overvalued.

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10.

Mr. A is a conservative investor who is looking to invest in equity markets. He is evaluating shares of VKP Ltd. with a PE ratio of 22, PEG ratio of 0.98, dividend yield of 3.5. Answer the following based on the information provided above

Q)What is the net take home salary of Mr. P?

a) Rs 45,000

b) Rs 35,000

c) Rs 5,000

d) Rs 40,000

Your score is

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NISM Series X-A: Investment Adviser (Level 1) Cert. 'Case Study 3'