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The primary market is a market for new issues or new financial claims.
There occurs the flow of long-term funds from the surplus sector to the government and corporate sectors
(through primary issues) and to banks and non-bank financial intermediaries (through secondary markets)
There are two major types of issuers of securities:
o Corporate entities who issue mainly debt and equity instruments and
o Government (Central as well as State) who issue debt securities.
New securities issued in the primary market can be traded only in the secondary market.
In the primary market, securities may be issued at face value, discount or a premium.
They may issue the securities in domestic market and/or international market.
It is a market for fresh capital and hence primary issues of securities lead to capital formation.
The volume, pricing and timing of sale of securities are influenced by returns in the secondary market.
Returns in the stock market depend on macro economic factors.
The new issue market can be classified:
Market where firms go to the public for the first time through initial public offering (IPO).and
Market where firms which are already trading raise additional capital through equity offering
There are three categories of participants in the primary market:
o Issuers of securities
- Corporates and Government.
o Investors in securities
- General Public, Corporates as well as the Government
- Merchant Bankers , Syndicate Members, Registrar To The Issue,
Bankers to the issue, auditors of the company and solicitors.