CMA Intermediate · Financial Management and Business Data Analytics · Capital Market
In the Indian capital market, a company raises funds by offering shares to the public for the first time through a fresh issue of equity shares. Which segment of the capital market does this transaction belong to?
The transaction belongs to the primary market, because the company is issuing new shares to the public for the first time and receives the funds itself. Secondary market trades only involve existing securities changing hands between investors, with no money reaching the issuer.
- APrimary marketCorrect
- BSecondary market
- CMoney market
- DForeign exchange market
Explanation
A first-time public offer of shares, called an IPO, creates new securities and brings funds directly to the issuer. This is the primary market. Trading of already issued shares among investors on a stock exchange is the secondary market, so option B is wrong because no existing shares are being traded.
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