Securities Market — Primary vs Secondary
A securities market is the marketplace where financial securities — shares, bonds, debentures, mutual-fund units, derivatives — are issued and traded. It has tw...
Two Halves of the Market
A securities market is the marketplace where financial securities — shares, bonds, debentures, mutual-fund units, derivatives — are issued and traded. It has two halves: the PRIMARY MARKET, where issuers raise fresh capital by selling securities for the first time (IPO, FPO, rights, private placement, QIP), and the SECONDARY MARKET, where already-issued securities trade between investors on stock exchanges.
When Infosys raised money from public investors in 1993, that was a PRIMARY market event — new shares, money flowing to the company. Every subsequent trade of those Infosys shares on NSE or BSE is a SECONDARY market event — no money flows to Infosys, only between two investors. The primary market mobilises capital for productive use; the secondary market provides exit/liquidity that makes the primary market attractive in the first place. Without a liquid secondary market, no investor would buy an IPO. SEBI regulates both markets under the Securities Contract (Regulation) Act 1956 and the SEBI Act 1992.
Brand-new securities created — money flows to the issuer
Already-issued securities changing hands between investors
Secondary-market liquidity is what makes the primary market work
SEBI Act 1992 + SCRA 1956 govern both halves
A Practical Example
| Feature | Primary Market | Secondary Market |
|---|---|---|
| Money flows to | Issuer (company) | Selling investor |
| Securities | Newly issued | Already issued |
| Examples | IPO, FPO, Rights, QIP, Private Placement | NSE / BSE trading |
| Pricing | Fixed / book-built | Continuous auction |
| Regulator | SEBI + Exchange | SEBI + Exchange |
What Makes This Important
Frequently Asked Questions
Primary. A Rights Issue offers new shares to existing shareholders — the company receives fresh capital, so it's a primary-market transaction even though only existing holders can participate.
🧠 Quick Quiz
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