What Is Primary
Market And Secondary Market?
In the financial
market, new securities are regularly issued to the public. There are numerous
financial products and services available to suit the individual needs of the
public. These financial products are traded on the capital market, which is
classified into two interdependent segments:
· Primary Market
· Secondary Market
Let us understand the meaning of both the
terms:
Meaning of Primary
Market
When the investors invest in securities
by purchasing it directly from the public, it is called primary market. In this
market, the company sells its securities which can be shares, bonds, etc. to
the public for the first time. The company generally sells its securities in
the primary market via Initial Public
Offering (IPO).
Meaning of Secondary
Market
A secondary market is a place where the securities of the
companies are traded after they have been offered to the public in the primary
market. The price of the securities (shares) keeps on fluctuating and never
remains constant. Secondary markets are
generally the stock markets like National Stock Exchange (NSE) or Bombay Stock
Exchange (BSE).
After understanding the meaning of both
the terms, let us understand the difference between primary market and
secondary market.
Difference Between
Primary Market and Secondary Market
Primary and Secondary market are very
different from each other. In the primary
market, the buyer can purchase the securities directly from the company when it
brings the new issue. However, this is
not the case in the secondary market. In
the secondary market, the buying and
selling of shares are between the investors
through stock exchanges. There is no role of issuing company in the secondary market. The primary market becomes secondary
market when the shares allotted by the company directly to the investors are
listed on the stock exchanges for buying and selling.
After knowing the difference between the
primary and secondary markets, it is important to know who trades in the primary and secondary market.
Who Trades In
Primary and Secondary Capital Markets?
The investors in primary and secondary
markets are different from each other because they have different expectations
and purposes. The secondary market investors purchase the securities only after
the holders of security in the primary market sell them. In the primary market,
investors invest in companies by applying for the IPO either for long term
investment or for listing gains. On the other hand, the secondary market
investors include traders and short/long term investors.
Conclusion
Indira Securities is a renowned name in
providing financial services. We provide services to investors who are looking
to invest in primary market as well as secondary market. By opening a demat
account with us, an investor can apply for Initial Public Offering (IPO) and
become a participant in the primary
market. Not only this you can invest and indulge in regular trading in
secondary markets by having a demat account with us.