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CS Executive · Capital Market and Securities Laws · Secondary Market in India

Arvind, a retail investor in Pune, wants to buy 50 shares of a listed company that were issued through an IPO two years ago. Which market segment does this transaction take place in?

The transaction takes place in the secondary market. Shares already issued in an earlier IPO are being traded between investors, and the issuing company receives no money from the sale. The primary market covers only fresh issuance of securities by the company.

  1. APrimary market, because shares are being bought by a new investor
  2. BSecondary market, because already issued securities are traded among investorsCorrect
  3. CMoney market, because the transaction involves cash settlement
  4. DPrivate placement market, because the shares were issued earlier

Explanation

The secondary market is where securities already issued are bought and sold among investors, usually on a recognised stock exchange. The primary market deals only with fresh issues by the company. Arvind buys from another investor, so the issuer receives no funds. Option A is wrong because a new buyer does not make the market primary.

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