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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

In the Indian securities market, which statement best describes the primary market as distinct from the secondary market?

The primary market is where issuers create and sell new securities to investors to raise funds, such as through an IPO. Trading of already issued listed shares among investors happens in the secondary market, not the primary market.

  1. AInvestors trade existing listed shares among themselves on the exchange
  2. BSecurities are issued afresh by the issuer to raise funds from investorsCorrect
  3. COnly derivative contracts are traded and settled
  4. DOnly government securities are traded between banks

Explanation

The primary market is where new securities are issued, for example through an IPO or FPO, and the issuer receives the money. Trading of already issued securities among investors takes place in the secondary market, so the first option describes the wrong market.

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