Article

PRIMARY MARKET (New Issues Market)

by Akahay

 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:

o

Market where firms go to the public for the first time through initial public offering (IPO).and

o

Market where firms which are already trading raise additional capital through equity offering

(FPO).

 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

o Intermediaries

- Merchant Bankers , Syndicate Members, Registrar To The Issue,

Bankers to the issue, auditors of the company and solicitors.

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