NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
In the Indian securities market, which of the following is the primary market activity?
A company issuing new shares through an IPO is a primary market activity, because securities are created and sold for the first time and the proceeds go to the issuer. Trades between investors on an exchange are secondary market transactions where the company receives no money.
- AA company issuing new shares to investors through an IPOCorrect
- BAn investor selling listed shares on the NSE to another investor
- CA trader buying a Nifty futures contract
- DA mutual fund investor redeeming units with the fund house on a secondary basis
Explanation
The primary market is where securities are issued for the first time and the issuer receives the funds. An IPO is a classic example. Trading of already-listed shares between investors, and futures trading, take place in the secondary or derivatives segment and do not raise fresh capital for the issuer.
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