NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments
Which statement about the primary market and secondary market in India is correct?
The secondary market provides liquidity to existing holders of securities. Investors buy and sell already-issued securities among themselves and the proceeds go to sellers, not the issuer, whereas IPOs and new issues belong to the primary market where the company raises fresh capital.
- AFunds from secondary market trades go to the issuing company
- BAn IPO is a secondary market transaction
- CSecondary market provides liquidity to existing securities holdersCorrect
- DThe primary market is where stock exchanges quote daily prices of listed shares
Explanation
The secondary market lets investors trade already issued securities among themselves, giving liquidity; proceeds go to the selling investors, not the issuer. An IPO is a primary market issue where funds go to the company, and daily price quotation occurs in the secondary market.
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