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9 views

Primary

Uploaded by

Shashank Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The **primary market** is the part of the capital market where new securities (such as

stocks and bonds) are issued and sold to investors for the first time. It is often referred to as
the "new issue market." The primary market enables companies, governments, or public
institutions to raise funds directly from investors.

### Key Features of the Primary Market:

1. **Issuance of New Securities**:


- Securities are sold for the first time to the public or specific investors.
- Examples include stocks during an **Initial Public Offering (IPO)** or bonds issued by
governments or corporations.

2. **Direct Sale to Investors**:


- Funds raised go directly to the issuer (the company, government, or organization) to fund
business operations, expansions, or other projects.

3. **No Secondary Trading**:


- Once the securities are issued, they are traded in the **secondary market**. The primary
market deals only with the initial sale.

4. **Types of Securities**:
- **Equity Shares**: Companies issue shares of ownership (stocks).
- **Debt Instruments**: Bonds or debentures issued to borrow money.
- **Preference Shares**: A mix of equity and debt features, offering fixed dividends.
- **Government Securities**: Issued by governments to fund public spending.

5. **Methods of Issuance**:
- **Initial Public Offering (IPO)**: Companies sell shares to the public for the first time.
- **Rights Issue**: Existing shareholders are offered additional shares at a discounted
price.
- **Private Placement**: Securities are sold to a select group of investors, such as
institutions.
- **Follow-on Public Offer (FPO)**: Additional shares are issued after the IPO.

6. **Regulation and Oversight**:


- Activities in the primary market are regulated by financial authorities, such as the
**Securities and Exchange Commission (SEC)** in the U.S. or the **Securities and Exchange
Board of India (SEBI)** in India, to ensure transparency and fairness.

### Importance of the Primary Market:


- **Capital Raising**: Helps businesses and governments fund new projects or expansions.
- **Economic Growth**: Promotes investment in productive ventures.
- **Investor Opportunities**: Offers investors a chance to buy securities at their issue price,
often lower than future market prices.

Once securities are issued in the primary market, they become available for trading in the
**secondary market**, where investors can buy and sell them among themselves.

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