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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets

In the Indian securities market, which of the following best describes the function of the secondary market?

The secondary market lets investors buy and sell securities that have already been issued, usually on stock exchanges. Its main function is to provide liquidity and price discovery. Fresh capital raising by issuers happens in the primary market, not the secondary market.

  1. AIt allows investors to trade securities already issued, providing liquidityCorrect
  2. BIt is where companies first raise capital by issuing new shares to the public
  3. CIt is where the RBI fixes the repo rate
  4. DIt is where SEBI registers new mutual fund schemes

Explanation

The secondary market is where previously issued securities are bought and sold among investors, typically on stock exchanges. This gives investors liquidity and an exit route. Raising fresh capital through new issues is the function of the primary market, so option B is wrong.

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