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 (IPO)

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.
 Security Analysis | Primary Market v/s Secondary Market Presentation

E-IPO
The companies are now
allowed to issue capital to
the public through the on-
line 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) Guidelines,
 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

 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 catalyzing market
Security Analysis | Primary Market v/s Secondary Market Presentation

 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 the
broker’s terminal
Security Analysis | Primary Market v/s Secondary Market Presentation

 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 Secondary
 In primary markets,
market
 In Secondary

securities are bought by market share are traded

way of public issue between two investors.
directly from the  Securities usually bought
company. and sold through the
 New issue are available in secondary market.
primary market.  The secondary market are
 The primary is a broker and dealer.
middlemen.  The secondary market
 New issue of common stock and bonds issues
stock;bonds and are sold to the public.
preferred stock are sold
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
economy.
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