NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments
In the Indian securities market, which of the following is the primary function of the secondary market?
The secondary market mainly provides liquidity to already-issued securities and enables continuous price discovery through trading on exchanges. Fresh capital raising, underwriting and IPO allotment belong to the primary market, not the secondary market.
- AProviding liquidity to existing securities and enabling price discoveryCorrect
- BRaising fresh capital for companies through new share issuance
- CUnderwriting of public issues by merchant bankers
- DAllotting shares to applicants in an IPO
Explanation
The secondary market is where already-issued securities are traded among investors on exchanges. This gives investors an exit route (liquidity) and continuous price discovery. Raising fresh capital, underwriting and IPO allotment are primary market activities.
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