Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to the Indian Financial Markets

Ms. Kavita Rao, a client, wants to understand the Indian financial system. Which statement about the primary market versus the secondary market is correct?

In the primary market the issuer receives money when securities are first issued to investors. In the secondary market existing securities are traded between investors, so sale proceeds go to the selling investor and not to the issuer. Both markets deal in equity and debt instruments.

  1. AIn the primary market, securities are traded between investors and the proceeds go to the selling investor
  2. BIn the primary market, the issuer receives the money from investors when securities are first issued, while in the secondary market proceeds go to the selling investorsCorrect
  3. CIn the secondary market, the issuing company receives the sale proceeds on every trade
  4. DThe primary market only deals with debt instruments, while the secondary market deals only with equity

Explanation

The primary market is where new securities are issued and the issuer receives the funds (IPO, FPO, rights, etc.). In the secondary market, existing securities change hands between investors and the issuer does not receive the proceeds. Both markets handle equity and debt, so the last option is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to the Indian Financial Markets shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to the Indian Financial MarketsFree diagnostic mock

More Introduction to the Indian Financial Markets questions