The primary market is where new securities, like stocks and bonds, are created and sold for the first time, allowing companies and governments to raise capital from investors.
An example of the primary market is IPO (Initial Public Offering). In Nov 2022, Paytm launched its IPO, issuing shares directly to the public through the primary market.
In the primary market, investors make a direct purchase from the company, while in the secondary market, trading occurs among investors.
The primary market focuses on fund-raising by companies, whereas the secondary market provides liquidity for investors.
In the primary market, pricing is fixed by the issuing company, while in the secondary market, it is determined by supply and demand.
Both the primary market and the secondary market are regulated by SEBI for fair and transparent practices.
The primary market involves a one-time transaction for each security issuance, whereas the secondary market allows for multiple transactions of the same security.
In the primary market, there is minimal involvement of brokers, while in the secondary market, brokers play a significant role in facilitating transactions.
The primary market facilitates capital formation, determines security pricing, ensures transaction safety, aids economic development & allows direct investment in companies.
The primary market includes five types that are Public Issue, Follow-on Public Issue, Rights Issue, Private Placement, and Preferential Allotment.
The primary market allows companies to raise capital directly, ensuring transparency, fair pricing, economic growth, and availability for all investors, big or small.
The primary market has high issuance costs, is time-consuming, risks under-subscription, and involves complex regulatory hurdles that can be cumbersome for companies.