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CSEET · Economic and Business Environment · Indian Financial Markets

Which statement about the primary market and secondary market for debt securities in India is correct?

Fresh securities are issued in the primary market, with proceeds going to the issuer, while already issued securities are traded among investors in the secondary market, which offers liquidity but gives the issuer no new funds from those trades.

  1. AFresh securities are issued to investors in the primary market, while existing securities are traded among investors in the secondary marketCorrect
  2. BExisting bonds are traded among investors in the primary market, while fresh issues occur in the secondary market
  3. COnly equity shares can be sold in the primary market
  4. DThe secondary market provides funds directly to the issuer for each trade

Explanation

The primary market is where new securities are issued and the issuer receives the funds. The secondary market is where already issued securities are bought and sold between investors, giving liquidity; the issuer receives no money from these trades. The other options reverse or distort this.

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