Beginner’s Guide to NCFM Certification Exam:
The article has been framed as below;
- About NCFM Exam
- NCFM Certification Modules
- Job Opportunities
- NCFM Exam Details
- What is the Deal?
- Why Pursue NCFM Certifications?
- NCFM Proficiency Certificate
- NISM Study Material
- NCFM Study Strategies: Before the Exam
- NCFM Strategies: During Exam
- NCFM Exam Deferral Policy
About NCFM Exam
Recognizing 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. NCFM exam is meant to help the people working with financial intermediaries acquire the necessary knowledge and skills to be able to offer a better quality of 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 is able to carry out their respective functions with a higher level of competence. There was very little in the name of formal education in the financial market operations in the past. In order to make up for the same, a number of certifications have been mandated for professionals engaged in certain specific roles in the financial industry.
This has become especially significant in view of the emergence of a number of specialized areas of functionality within the financial domain, requiring professionals with a thorough grasp of the concepts and practices involved. 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 including Beginner, Intermediate and Advanced levels, catering to respective needs of candidates with different levels of expertise.
Here, we are offering basic info on each of the certification modules in beginner, intermediate and advanced levels:
Stock Analysts, Portfolio Managers, employees of stockbrokers/sub-brokers, employees of the treasury, and investment division of banks and financial institutions along with other finance professionals can immensely benefit from these certifications in terms of enhancing their theoretical as well as practical knowledge in specific areas of finance. This would be of great help for professionals in furthering their careers and for students aspiring to make a career in finance.
NCFM Exam Details
These certification modules are divided into three broad categories including Foundation, Intermediate, and Advanced, catering to students and professionals with varying levels of expertise in different knowledge areas. Each module deals with a certain specific area of finance domain and introduces students to fundamental principles and methodologies involved depending on which broad category that specific module comes under.
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 to enroll for these NCFM modules except for fluency in English and basic computer literacy. Apart from that, no knowledge or experience in the financial sector is required to sit for these exams.
What is the Deal?
Before NISM certifications were instituted, NCFM certification modules were the standard of knowledge by which finance professionals were measured and 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 which would be of relevance to professionals working within that specialized area. There are no qualifications or age restrictions to enroll for any of the modules and exams are conducted round the year. However, a candidate must sit for an exam within six months from the date of registration. It is not possible to reschedule the test once registered for the same.
These are Multiple-Choice Questions (MCQ) based exams, most of them consisting of 60 questions, with a total of 100 marks each. There is a system of negative marking so the students should be careful while attempting the test and keep incorrect answers to a minimum. Passing marks are either 50 or 60% depending on the specific module chosen and the certificate validity is 5 years for most of the modules. The marks are provided on the spot as part of an automated examination system. The certificates are mailed to the candidates within 15-20 days of appearing for the exam, if successful. For a few of the exams, this period could be longer.
On completing certain 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 earned only once.
Why Pursue NCFM Certifications?
These certifications can help finance professionals become better equipped to carry out their duties with a high level of efficiency 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 simple fact is that there was little in the name of formal education for the finance domain in India before the introduction of the NCFM exam, and as cannot be stressed enough, with the emergence of numerous specialized knowledge areas in finance, formal education has become a must. This alone speaks volumes for NCFM modules.
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NCFM Proficiency Certificate
NSE also awards special certificates for the successful completion of a specific combination of NCFM modules.
This includes the “Proficiency Certificate” awarded to candidates who have completed the following certifications:
- 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.
- 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.
- NSE Certified Investment Analyst Pro (NCIAP): Awarded on completing NCFM Investment Analysis and Portfolio Management Module + Technical Analysis Module + Fundamental Analysis Module
- NSE Certified Investment Analyst Champion (NCIAC): Awarded on completing NCFM Investment Analysis and Portfolio Management Module + Technical Analysis Module + Fundamental Analysis Module + Wealth Management Module.
Here, we will discuss the certifications cited above which would be of help in earning these proficiency certificates.
First, we would focus on the certifications required to earn the credentials of NSE Certified Derivatives Pro (NCDP) and NSE Certified derivatives Champion (NCDC). These certifications can be of special interest to those professionally involved with the derivatives market and intending to further their career.
Equity Derivatives: A Beginner’s Module (EDBM)
This certification is designed to offer knowledge of basic principles and their application in equity derivatives. Beginning with an introduction and definition of derivatives, their role, limitations, and utility, the curriculum goes on to discuss trading futures and options before culminating with the methods of tracking, settlement, accounting, and taxation of derivatives on the exchange.
This certification can be especially useful for individual investors, employees of BPOs or IT companies, employees of brokers, or sub-brokers along with those interested in the field.
Exam Weightage or Breakdown:
It must be kept in mind that different topics covered in the curriculum content are not weighted equally in the exam and the candidates should be aware of the exam weightage or breakdown. This could help them prepare better and ensure they are well prepared for high weightage areas to be able to score 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).
Derivatives Market (Dealers) Module
This certification is designed to help students become acquainted with the fundamentals of equity derivatives and learn about their use in speculation, hedging, and arbitraging. Students would also learn about the trading, settlement, and other aspects along with risk management of equity derivatives and the regulatory framework within which the market operates.
It can be of great utility 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 along with anyone interested in the derivatives market.
Options Trading Strategies Module
It is advisable to pursue the Derivatives market (Dealers) Module before attempting the present module which primarily focuses on different strategies employed in options trading which might be suitable under varying market conditions. This module introduces students to various options strategies and helps gain an understanding of option payoffs. The curriculum also discusses the risks involved in applying these strategies to be able to achieve the desired objective.
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 laid down in 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.
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
Next, we would 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 professionally working as an investment analyst or similar roles and looking to further their expertise in the field along with career growth.
Investment Analysis and Portfolio Management Module
This certification is aimed at imparting the 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 the modern portfolio theory along with various aspects of managing a portfolio.
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.
Technical Analysis Module
This module introduces students to the fundamentals of technical analysis and goes on to discuss more intricate aspects of technical analysis including different types of charts, patterns, and indicators along with their significance. The curriculum also discusses various trading strategies and the trading psychology at work along with the aspect of risk management to offer a complete and comprehensive view of technical analysis.
This certification holds special relevance to employees of 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.
Fundamental Analysis Module
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 financial analysis involved in the process before dealing with the concepts of various valuation methodologies employed for the purpose.
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).
Wealth Management Module
This is a unique certification that 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. The curriculum discusses various types of investment products and services along with methods of investment evaluation, risk profiling, and asset allocation.
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).
NCFM Study Material
On enrollment for any specific module, the study material is provided only in electronic format to students. 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 INR 500 per module per workbook in favor of NSE.
The study material for the Corporate Governance Module can be purchased from ICSI. However, no study material is available for the Compliance Officers Module and the candidates are required to refer to relevant books, circulars, and manuals in keeping with the prescribed curriculum.
NCFM Study Strategies: Before the Exam
Avoid Rote Learning:
Do not rely on mugging, it is the least effective learning strategy. Instead, make it a point to study at length and focus on underlying concepts and their application in practical situations.
Remember Subject Weights:
Keep in mind that certain specific portions have higher weights than other parts, make sure to study them thoroughly to not miss out on those critical marks. Do not make the mistake of focusing only on high weightage areas as well, become thoroughly acquainted with the curriculum.
Practice Makes You Perfect:
Practice as many mock tests as available online as possible. It would help you identify weak areas and make improvements accordingly. This would help you with time management as well during the exam.
NCFM Strategies: During Exam
Study, Understand, And then Attempt:
Study the questions thoroughly and carefully consider the response options presented. Sometimes tricky and similar words are used in defining responses but be sure that only one of them is correct. Make a wise choice.
Avoid Incorrect Responses:
There is negative marking at work so it’s better to be careful than sorry. Avoiding any negative marking can help you score higher.
Start Easy, Manage your Time:
Always start with the easiest questions and leave the tougher ones for the latter half of the exam and be sure to keep an eye on the time.
NCFM Exam Deferral Policy
No rescheduling of an exam is possible. One must enroll again for a module to sit for the exam on a new schedule.