Financial

Market
Operations
Presented by:
ROLL
NAME TOPIC
NO.

53 Ali Introduction & features of primary market

61 Rohan Advantages and disadvantages of primary market

46 Eros Introduction & features of secondary market

Advantages and disadvantages of Secondary market

57 Chirag
Introduction
• Capital Market
 Financial securities are traded
 Between individuals/institutions
 Used for long term funding

Primary
market
Capital
market
Secondary
market
Primary
market
• Market wherein

 Buying and selling

 Newly issued securities

 Also known as ‘New issue market’

 E.g. IPO
Features of Primary market

New issues

No particular place

Various methods of
floating capital

Before Secondary
market
Advantages Of
Primary Market
 •• The
The primary
primary market
market acts
acts as
as aa potential
potential avenue
avenue for
for
1.Avenue For diversification
diversification to
to cut
cut down
down onon risk.
risk.
Investment •• It
It enables
enables an
an investor
investor to
to allocate
allocate his/her
his/her investment
investment
across
across different
different categories.
categories.

•• Funds
Funds are
are mobilised
mobilised from
from commoners
commoners for
for investing
investing in
in
2.Mobilisation other
other channels.
channels.
of Saving •• Investor
Investor can
can gain
gain good
good returns
returns with
with the
the money
money invested
invested

3.Channelising •• As
As it
it helps
helps to
to mobilize
mobilize the
the small
small and
and scattered
scattered savings
savings of
of
an
an investor.
investor.
Savings for •• The
The funds
funds are
are utilized
utilized for
for productive
productive purposes
purposes and
and thus,
thus,
productive use the
the wastage
wastage inin unproductive
unproductive uses
uses is
is avoided
avoided
4.Source • For rapid
rapid development of
growth
growth of
of a country
country requires the
of large scale industries
industries which need huge
of large capital.
capital.
supplier • Therefore, huge
huge money
money can be raised in a primary
fund market by
by floating
floating new shares in
in the market
market

•• The
The primary market
market facilitates
facilitates increase
increase in
in
5.Rapid production
production and
and productivity
productivity in
in the
the economy.
economy.
industrial •• And
And with
with new
new companies
companies established
established they
they
Growth promote
promote rapid
rapid industrial
industrial growth
growth in
in the
the country.
country.
Disadvantages Of
Primary Market
1.Possibilty For • There is ample scope of attracting investors by giving
deceiving misleading information.
• This affects the money of the innocent investor.
investors

2.No fixed • There is no fixed norms for getting the appraisals

norms for approved by the designated institutions.
project • Hence, Poor investors have no scope to ascertain the
actual profitability of a project.
appraised

• There Is no seriousness among most of the investors

3.Lack of post
to check the performance of the company after the
issue issue.
seriousness. • Once the issue is subscribed, their duty is over.
4.Ineffective • The merchant bankers do not pay attention
to the technical, managerial and feasibility
role of aspects while appraising the project.
merchant • As a result, the investors are duped by the
bankers. companies.

• There is a delay in receiving allotment

5.Delay in the letters, share certificates, refund orders
allotment etc.
process • All these factors tend to affect the small
investors.
Secondary
market
Market in which
 buying & selling of

previously issued securities is done

 transactions are done through the medium of

stock exchange

also known as
STOCK EXCHANGE

PURPOSE –
to create liquidity
Sell securities for cash

To meet their liquidity needs

Secondary market components are:

1. Spot Market
traded for immediate delivery & payment

2. future market
traded for future delivery & payment
Features of secondary market

Creates liquidity

Comes after primary

market

Particular place

Encourages new
instrument
Services of stock exchange
Liquidity and marketability

Stock of funds

Supply of long term funds

Flow of capital to profitable ventures

Promotion of investment

Marketing of new issues

 Advantages of
secondary market
 Short • Investors make good gain in
period brief period.

Stock • They help in evaluating a

prices company effectively.

• The ease of trade ensures

Liquidity liquidity.
Benefit to • Trading in these markets does
small not require hefty amount,
which helps small investors.
investors

• Heavy regulations ensures

Safety safety of investors funds.
Disadvantages of
secondary market
 High • Price fluctuations may lead to
volatility unpredictable losses.

Brokerages
• Investors profits may suffer a dent due
to commissions on each transactions.

Risk factor
• They are subject to high risk due to
external factors.
Government • Some policies can act as a
policies hindrance in this market.

• Trading can be time

Procedures consuming ,because of
lengthy procedures.