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Question
Explain the following term/concept.
Primary market
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Solution
- In the primary market, companies sell their shares, debentures, etc. for the first time to raise fresh capital. The primary market, also known as the new issues market, solely handles the issuance of new securities.
- The main function of the primary market is to facilitate capital formation. It is a place where investors can invest their surplus funds profitably and companies can raise capital easily. On the basis of the type of funds raised, Primary market can be classified as Equity market and Debt market. In Equity market, securities like Equity shares, Preference Shares, Rights Issue, etc. are issued. In Debt market, debentures, bonds, fixed deposits, etc. are issued.
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