Beginner's Guide to NCFM Certification Exam

If you are considering undertaking NCFM modules, there are many to pursue. Definitely, cannot consider giving all of them at the same time. We want to provide every candidate with a summary of their modules through this article, which might help students decide which one they should choose from.

The structure of the article is as below: -

Marking the significance of the role of intermediaries in Indian financial markets, in 1998 National Stock Exchange (NSE) launched NSE’s Certification in Financial Markets (NCFM) as an online testing and certification program. This exam helps people working with financial intermediaries acquire the necessary knowledge and skills to offer better services.

International experience in the financial domain and the unique needs of Indian financial markets also dictate the need for rigorous testing and certification to ensure that finance personnel can carry out their respective functions with a higher level of competence. Unfortunately, there was less formal education in the past financial market operations. As a result, numerous certifications have been mandated for professionals engaged in certain specific roles in the financial industry.

It has become significant because of the emergence of several specialized areas of functionality within the financial domain, requiring professionals with a thorough grasp of the concepts and practices involved. Accordingly, NCFM modules are designed to cover varied aspects of financial services and offer guidance to those engaged in relevant roles in the industry.

NCFM modules are divided into three broad categories: -

• Beginner level
• Intermediate level
• Advanced level

Catering to the individual needs of candidates with different levels of expertise. Here, we are offering basic information on each of the certification modules in beginner, intermediate and advanced levels:

Stock analysts, portfolio managers, stockbrokers/sub-brokers, treasury employees, the investment division of banks and financial institutions, and other finance professionals can immensely benefit from these certifications to enhance their theoretical and practical knowledge in specific areas of finance. This course would help professionals further their careers and students aspiring to make a career in finance.

These certification modules are divided into three broad categories: foundation, intermediate, and advanced, catering to students and professionals with varying expertise in different knowledge areas. Each module deals with a specific area of the finance domain and introduces students to fundamental principles and methodologies depending on under which broad category that specific module comes.

Exam Dates: Students can enroll online for a certification module of their choice and schedule the exam around the year.

NCFM Exam Eligibility: There are no special eligibility criteria for these NCFM modules except for fluency in English and basic computer literacy. Besides, no knowledge or experience in the financial sector is required to appear for these exams.

Long before NISM certifications were instituted, NCFM certification modules were the standard of knowledge by which finance professionals were measured. Moreover, many of them were mandated by SEBI to be possessed by finance professionals working in relevant areas.

Each of the modules is designed to impart knowledge of a specific area in the financial domain that would be relevant to professionals working within that specialized area. There are no qualifications or age restrictions to enroll for any modules, and exams are conducted around the year. However, a candidate may appear for an exam within six months from registration. One may not reschedule the test once registered.

These are Multiple-Choice Questions (MCQ) based exams, most of them consisting of 60 questions, with 100 marks each. There is a negative marking system, so the students must stay alert while attempting the test and maintain incorrect answers to a minimum. Passing marks are either 50% or 60% depending on the specific module chosen, and the certificate validity is five years for most of the modules. The marks are provided on the same day as part of an automated examination system. If successful, the certificates are mailed to the candidates within 15-20 days of appearing for the exam. For several exams, this period might be more.

On completing pre-specified combinations of NCFM modules, candidates can earn a “Proficiency Certificate,” which would validate their knowledge and skills in that specific domain. This proficiency certificate has no expiry and needs to be made only once.

These certifications can help finance professionals become better equipped to conduct their duties efficiently in this era of specialization. In addition, it encourages students and other interested individuals to gain an insight into and working knowledge of financial markets, which can be of immense utility in making informed investment decisions or even making a career in finance.

The fact is that before the introduction of the NCFM exam, there was little in the name of formal education for the finance domain in India. However, with the emergence of numerous specialized knowledge areas in finance, formal education has become a must. Therefore, it solely proves for NCFM modules.

NSE also awards special certificates for completing a specific combination of NCFM modules.

It includes the “Proficiency Certificate” allowed to candidates who have completed the following certifications: -

1. NSE Certified Derivatives Pro (NCDP): This certificate of proficiency is awarded for completing NCFM equity derivatives: A beginner’s module + derivatives market (dealers) module + options trading strategies module.
2. NSE Certified derivatives Champion (NCDC): This certificate is awarded on successful completion of NCFM equity derivatives: A beginner’s module + derivatives market (dealers) module + options trading strategies module + options trading (advanced) module.
3. NSE Certified Investment Analyst Pro (NCIAP): This certificate is awarded on completing the NCFM investment analysis and portfolio management module + technical analysis module + fundamental analysis module.
4. NSE Certified Investment Analyst Champion (NCIAC): This certificate is awarded on completing the NCFM investment analysis and portfolio management module + technical critique module + fundamental analysis module + wealth management module.

Here, we will discuss the certifications cited above, which can help earn these proficiency certificates.

Initially, we emphasize the certifications required to reach NSE Certified Derivatives Pro (NCDP) and NSE Certified Derivatives Champion (NCDC) credentials. These certifications may gain special interest from those professionally involved with the derivatives market and intending to further their careers.

This certification is designed to offer basic principles and their application in equity derivatives. From the introduction and definition of derivatives, their role, limitations, and utility, the curriculum discusses trading futures and options before culminating with the tracking, settlement, accounting, and taxation of derivatives on the exchange.

Relevance:

This certification can be useful for individual investors, BPOs or IT companies, employees of brokers or sub-brokers, and those interested in the field.

Exam Weightage or Breakdown:

One must keep in mind that different topics covered in the curriculum content are not weighted equally in the exam, and the candidates should know the exam weightage or breakdown. However, it may help prepare better and ensure that high weightage areas are good for scoring well during the exam.

Subject-wise weights or breakdown:

Introduction (15 marks), Definition of Basic Derivatives (15 marks), Application of Derivatives (10 marks), Trading Futures (20 marks), Trading Options (20 marks), Derivatives trading on the exchange (20 marks).

This certification is designed to help students know the fundamentals of equity derivatives and learn about their use in speculation, hedging, and arbitraging. In addition, students should learn about the trading, settlement, and other aspects of risk management of equity derivatives and the regulatory framework within which the market operates.

Relevance:

It can be an advantage for individual investors, High-Networth Individuals (HNIs), portfolio managers, stockbrokers, or sub-brokers dealing in derivatives, custodians, or employees of mutual funds and financial institutions with anyone interested in the derivatives market.

It is advisable to pursue the derivatives market (dealers) module before attempting the current module, focusing on different strategies employed in options trading that might be suitable under varying market conditions. This module introduces students to various options strategies and helps them understand option payoffs. The curriculum also discusses the risks of applying these strategies to achieve the desired objective.

Relevance:

This certification holds a high level of relevance for investors, traders, and employees of BPOs or IT companies.

Options Trading (Advanced) Module

Building upon the foundation in the options trading module, this advanced level module delves deeper to help students acquire an intricate understanding of the options market and methods of identifying and applying suitable strategies.

Relevance:

It is useful for investors, traders, and those employed with financial intermediaries to gain an expert level understanding of the working of the options market.

Subject-wise weights or breakdown

Now, let us focus on the certifications required to earn the credentials of NSE Certified Investment Analyst Pro (NCIAP) and NSE Certified Investment Analyst Champion (NCIAC). These certifications can be highly relevant to those working as investment analysts or similar roles and looking to further their field expertise and career growth.

This certification aims to impart knowledge of fundamental principles of investment, financial markets, capital market efficiency, financial analysis and valuation, and investment management, among other things. An important focus of the course is on portfolio management, and students are introduced to modern portfolio theory along with various aspects of managing a portfolio.

Relevance:

This certification would most benefit those working with the treasury & investment division of banks or other financial institutions along with other finance professionals and students.

This module introduces students to the fundamentals of technical analysis. It discusses more complex aspects of technical analysis, including different types of charts, patterns, indicators, and their significance. The curriculum also discusses various trading strategies and the trading psychology at work, along with risk management, to offer a complete and comprehensive view of technical analysis.

Relevance:

This certification holds special relevance to treasury and investment divisions of banks and financial institutions, stock analysts, and finance professionals in general.

Subject-wise weights or breakdown:

Introduction (12 marks), Candle Charts (13 marks), Pattern Study (20 marks), Major Indicators & Oscillators (20 marks), Trading Strategies (12 marks), Dow Theory and Elliot and wave Theory (12 marks), Trading Psychology and Risk Management (11 marks) to make a total of 100 marks.

This certification discusses the definition and basics of fundamental analysis and how it can help make better investment decisions. Next, the curriculum discusses financial statements that form the core of the economic analysis involved before dealing with the concepts of various valuation methodologies employed for the purpose.

Relevance:

This certification is of special utility to professionals working with treasury and investment divisions of banks and financial institutions, stock analysts, and other finance professionals.

Subject-wise weights or breakdown:

Introduction (15 marks), Brushing Up the Basics (15 marks), Understanding Financial Statements (35 marks), Valuation Methodologies (35 marks).

This unique certification deals with personal financial planning and wealth management at length, discussing the concepts involved and identifying the most suitable investment options and strategies along with risk management. In addition, the curriculum discusses various types of investment products and services along with methods of investment evaluation, risk profiling, and asset allocation.

Relevance:

This certification holds special relevance for investors and finance professionals seeking expert knowledge of wealth management concepts for study and practical application.

Subject-wise weights or breakdown:

Introduction (8 marks), Wealth Management & the Economy (9 marks), Investment & Risk Management: Equity (13 marks), Investment & Risk management: Debt (10 marks), Investment & Risk Management: Alternate Assets (8 marks), Investment products & services (8 marks), Investment Evaluation Framework (5 marks), Risk Profiling & Asset Allocation (7 marks), Risk Management through Insurance (5 marks), Elements of Taxation (10 marks), Taxation of Investment Products (12 marks), Estate Planning (5 marks).

The study material is provided only in electronic format to students on enrollment for any specific module. However, those willing to purchase workbooks from NSE (Except Corporate Governance, Compliance Officers Modules, FPSB Modules, FLIP Modules, IMS Preschool Modules & AIWMI Modules) can send a demand draft of ₹500 per module workbook in favor of NSE.

Students can purchase the study material for the corporate governance module from ICSI. However, no study material is available for the compliance officer’s module, and the candidates are required to refer to relevant books, circulars, and manuals in keeping with the prescribed curriculum.

Avoid Rote Learning:

Never rely on mugging. It is the least effective learning strategy. Rather, make it a point to study at length and focus on underlying concepts and their application in practical situations.

Remember Subject Weights:

Remember that some specific portions have higher weights than other parts, make sure to study them thoroughly to avoid missing those critical marks. However, do not focus only on high weightage areas and become thoroughly acquainted with the curriculum.

Practice Makes You Perfect:

Practice as many mock tests as available online. It would help to identify weak areas and make improvements accordingly. Besides, it may also help with time management during the exam.

Study, Understand, And then Attempt:

Study the questions thoroughly and carefully consider the given response options. Sometimes tricky and similar words are used to define responses, but only one is correct. So, make a wise choice.

Avoid Incorrect Responses:

There is negative marking at work, so better be careful than regret. But, on the other hand, avoiding any negative marking can help you score higher.

Start Easy, Manage your Time:

Always start with the easiest questions. Leave the tougher ones for the latter half of the exam. Always keep an eye on the time.

No rescheduling of an exam is possible. One must enroll again for a module to appear on a new schedule for the exam.

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