Q.4 (4) Distinguish between Primary Market and Secondary Market.
Best answer
Answer: Distinction between Primary Market and Secondary Market
| Point | Primary Market | Secondary Market |
|---|---|---|
| Meaning | Market for the issue of new securities by companies (new issues market). | Market for buying and selling of existing (already issued) securities. |
| Function | Raises fresh capital for companies. | Provides liquidity and marketability to existing securities. |
| Parties | Company issues securities directly to investors. | Investors trade among themselves through brokers on a stock exchange. |
| Flow of funds | Money flows from investors to the company. | Money flows from one investor to another; the company gets nothing. |
| Price | Price is fixed by the company (fixed price or book building). | Price is determined by demand and supply on the stock exchange. |
| Place | No fixed place; issues are made through prospectus, intermediaries and the online system. | Has a definite place and organisation, i.e. stock exchanges such as BSE and NSE. |
| Order | Securities are first sold here. | Securities are traded here only after they are listed. |
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