NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
Which statement about the primary market and secondary market in India is correct?
In the primary market, the issuer sells new securities to investors and receives the funds. The secondary market only provides trading in already issued securities between investors, so the issuer gets no proceeds. Rights issues are made by the company and are therefore primary market activity.
- ATrading among investors on a stock exchange is part of the primary market
- BIn the primary market, securities are issued by the issuer to investors and funds flow to the issuerCorrect
- CIn the secondary market, the issuing company receives the money from each trade
- DA rights issue belongs to the secondary market
Explanation
The primary market is where new securities are issued and the proceeds go to the issuer. In the secondary market, existing securities are traded between investors, and the issuer receives no money from those trades. Rights issues are offerings by the company, so they belong to the primary market.
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