Differentiate between ‘Primary Market’ and ‘Secondary Market’ on … - Vidyadip

Question

Differentiate between ‘Primary Market’ and ‘Secondary Market’ on any five basis.

✓

Answer

Basis	Primary Market (New Issue Market)	Secondary Market (Stock Exchange)
Securities traded	There is sale of securities by new companies or further (new) issues of securities by existing companies to investors.	There is trading of existing securities only.
Purpose	Securities are sold by the company to the investor directly (or through an intermediary)	Ownership of existing securities is exchanged between investors. The company is not involved at all.
Capital formation	The flow of funds is from savers to investors, i.e. the primary market directly promotes capital formation.	Enhances encashability (liquidity) of securities, i.e. the secondary market indirectly promotes capital formation.
Buying/ selling	Only buying of securities takes place in the primary market. Securities cannot be sold by the investors.	Both the buying and the selling of securities can take place on the stock exchange.
Price determination	Prices are determined and decided by the management of the company.	Prices are determined by the forces of demand and supply.
Location	There is no fixed geographical location.	Located at specified places.

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