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

Which of the following is a function of the primary market in India rather than the secondary market?

Raising fresh capital through an IPO is a primary market function, because the issuer sells new securities directly to investors and receives the funds. Liquidity, order-matching price discovery and clearing settlement relate to the secondary market where existing securities are traded.

  1. AProviding liquidity to existing shareholders through exchange trading
  2. BRaising fresh capital for companies through an IPOCorrect
  3. CPrice discovery through continuous order matching among investors
  4. DSettlement of trades between brokers via a clearing corporation

Explanation

The primary market is where securities are issued for the first time and new capital flows to the issuer, as in an IPO. The other options describe trading, price discovery and settlement of already-issued securities in the secondary market.

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