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CS Executive · Capital Market and Securities Laws · Basics of Capital Market

Meera Textiles Ltd's shares are bought and sold daily among investors through the National Stock Exchange, and the company receives no money from these trades. Which market segment does this activity represent?

This is the secondary market. Shares already issued are being traded between investors on the exchange, and the issuing company receives no funds from these trades. Only fresh issuance of securities by the company, where it raises money, belongs to the primary market.

  1. APrimary market, because the shares were originally issued by the company
  2. BSecondary market, because existing securities are traded among investorsCorrect
  3. CMoney market, because trades settle within a short period
  4. DPrivate placement market, because only selected investors participate

Explanation

Trading of already issued securities among investors on an exchange is the secondary market. The issuer gets no proceeds from such trades. The primary market involves fresh issue of securities directly by the company, so option A is wrong.

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