NISM Certifications · NISM-Series-VI: Depository Operations

Introduction to the Indian Capital Market: formula sheet

Key formulas

Primary market: Issuer → new securities → investor; money flows to the issuer; Examples: IPO, FPO, rights issue, private placement. Capital is raised here.
Secondary market: Investor ↔ investor through an exchange; no money to the issuer; Gives liquidity and price discovery. Trades happen in listed securities.
Link between the markets: Primary issue → listing → secondary trading; Listing makes new securities tradable on an exchange.
Capital formation: Savings → securities market → productive investment; The core economic role of the securities market.

The securities market has two parts: primary market and secondary market.
Primary market: securities are issued for the first time and the issuer receives the funds.
Secondary market: existing securities are traded between investors, usually on stock exchanges.
In the secondary market, the issuer does not receive money from trades between investors.
The secondary market gives investors liquidity and a way to exit.
The primary market helps issuers raise capital; the secondary market supports price discovery.
SEBI is the regulator of the securities market in India.
Depositories hold securities in electronic form and enable transfer without physical certificates.
Clearing corporations handle the settlement of trades done on exchanges.
NISM-Series-VI has 100 questions, 100 marks, 2 hours, pass mark 60% and negative marking of 25%.
Remember that the exchange, the clearing corporation and the depository perform different functions.

Calling a trade of IPO-allotted shares a primary market transaction. Fix: Judge by the transaction. Once shares are allotted, any later sale between investors is secondary.
Thinking the issuer receives money when shares trade on the exchange. Fix: In the secondary market the seller is an investor. The issuer gets money only at issue.

Always ask who receives the money. It settles most questions quickly.
Memorise the list of primary routes: IPO, FPO, rights issue, private placement.
Remember that listing connects the two markets, and that depositories serve both.
Watch for options that look right but swap the functions of the two markets.
With negative marking in NISM-Series-VI, skip an option pair only after eliminating the clearly wrong ones, then answer.