Skip to content

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

Which of the following statements about the primary market and the secondary market in India is correct?

An IPO is a primary market transaction in which the issuer receives the funds raised from investors. In the secondary market, existing securities are traded between investors and the issuer gets no proceeds. Even a follow-on public offer by a listed company is a primary market issue.

  1. AIn the primary market, securities are traded between investors and the issuer receives the sale proceeds
  2. BIn the secondary market, the issuer receives fresh funds each time its shares are traded on the stock exchange
  3. CAn IPO is an example of a primary market transaction where the issuer receives the funds raisedCorrect
  4. DA follow-on public offer takes place in the secondary market because the company is already listed

Explanation

In the primary market, securities are issued for the first time or afresh (IPO, FPO, rights issue) and the issuer receives the money. In the secondary market, investors trade among themselves and the issuer gets nothing. A follow-on offer is still a fresh issue and so belongs to the primary market.

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