PRIMARY MARKET

VS
SECONDARY MARKET

Security Analysis | Primary Market v/s Secondary Market Presentation

CONTENTS

Primary Market
Meaning
What is new Issue market ?
IPO
Book Building

Secondary
Market
Meaning
Stock Exchange
SEBI

Security Analysis | Primary Market v/s Secondary Market Presentation

Primary Market
Primary market is a market for raising fresh
capital in the form of shares and debentures.
It allows for the formation of capital in the
country and the accelerated industrial and
economic development.
Public limited companies who are desirous of
raising capital funds through the issue of
securities approach this market.
The Public limited and government
companies are the issuers and individuals,
institutions and mutual funds are the
investors in this market.

Security Analysis | Primary Market v/s Secondary Market Presentation

NEW ISSUE MARKET

Meaning :

It refers to the set-up which

helps the industry to raise the
funds by issuing different types
of securities.
These securities are issued
directly to the investors (both
individuals as well as
institutional) through the
mechanism called primary
market or new issue market.
The securities take birth in this
market.

Security Analysis | Primary Market v/s Secondary Market Presentation

FUNCTIONS OF NEW ISSUE MARKET

The main function of new issue market

is to facilitate transfer resources from
savers to the users.
It plays an important role in mobilizing
the funds from the savers and
transferring them to the borrowers.
The main function of new issue market
can be divided into three service
functions:
1. Origination.
2. Underwriting.
3. Distribution.

Security Analysis | Primary Market v/s Secondary Market Presentation

METHODS OF FLOATING NEW ISSUES

The various methods which are used

in the floating of securities in the
new issue market are:

Public issues.
Offer for sale.
Placement.
Right issues.

Security Analysis | Primary Market v/s Secondary Market Presentation

Public issues or Initial public offering

When a company makes public
issue of shares for the first
time, it is called Initial public
Offer.
The company has to appoint
underwriters in order to
guarantee the minimum
subscription.
An underwriter is generally an
investment banking company.
The underwriter agrees to pay
the certain price and buy a
minimum number of shares, if
they are not subscribed by the
public.

(IPO)

Security Analysis | Primary Market v/s Secondary Market Presentation

E-IPO
The companies are now
allowed to issue capital to
the public through the online system of the stock
exchanges. For making
such on-line issues, the
companies should comply
with the provisions
contained in Chapter 11A
of SEBI( Disclosure and
Investor Protection)

Security Analysis | Primary Market v/s Secondary Market Presentation

Book-Building/Price Band

It is a process used for marketing a

public offer of equity shares of a
company.
Book building is a process wherein
the issue price of a security is
determined by the demand and
supply forces in the capital market
The Price at which securities will be
allotted is not known in advance to
the investor. Only an indicative price
range is known. (Also called price
band and it should not be more than
20% of the floor price).

Security Analysis | Primary Market v/s Secondary Market Presentation

Secondary
Market

The secondary market is that

market in which the buying
and selling of the previously
issued securities is done.
The transactions of the
secondary market are
generally done through the
medium of stock exchange.
The chief purpose of the
secondary market is to create
liquidity in securities.

Security Analysis | Primary Market v/s Secondary Market Presentation

What are the products dealt in

Secondary Markets ?

Equity shares.
Debentures.
Government securities.
Bonds.
Commercial Papers.

Security Analysis | Primary Market v/s Secondary Market Presentation

SEBI Risk Management System

The primary focus of risk

management by SEBI has been
to address the market risks,
operational risks and systemic
risks.

SEBI has been continuously

reviewing its policies and
drafting risk management
policies to mitigate these risks,
thereby enhancing the level of
investor protection and

Security Analysis | Primary Market v/s Secondary Market Presentation

Process of Trading

Step 1.Investor / trader

decides to trade

Step 2.Places order with a

broker to buy / sell the required
quantity of respective securities

Step 3.Best priced order

matches based on price-time
priority

Step 4.Order execution is

electronically communicated to

Security Analysis | Primary Market v/s Secondary Market Presentation

Process of Trading

Step 5.Trade confirmation slip

issued to the investor / trader by
the broker

Step 6.Within 24 hours of trade

execution, contract note is issued to
the investor / trader by the broker

Step 7.Pay-in of funds and

securities before T+2 day

Step 8.Pay-out of funds and

securities on T+2 day

Security Analysis | Primary Market v/s Secondary Market Presentation

Different between
primary market and
secondary market
Primary
market
Inprimary markets,

securities are bought by

way of public issue
directly from the
company.
New issue are available
in primary market.
The primary is a
middlemen.
New issue of common
stock;bonds and
preferred stock are sold

Secondary
market
InSecondary

marketshare are traded

between two investors.
Securities usually
bought and sold through
the secondary market.
The secondary market
are broker and dealer.
The secondary market
stock and bonds issues
are sold to the public.

Security Analysis | Primary Market v/s Secondary Market Presentation

Conclusion
The lack of an
advanced and vibrant
capital market can lead
to underutilization of
financial resources. The
developed capital
market also provides
access to the foreign
capital for domestic
industry. Thus capital
market definitely plays
a constructive role in
the over all
development of an

Security Analysis | Primary Market v/s Secondary Market Presentation

Group Members :
Name

Roll. No

Pankaj Bali

58(FM.12.56)

Udesh Poojary

22(FM.12.22)

SIES College, Nerul,

Navi Mumbai
S.Y.Bfm