PRIMARY MARKETVS

SECONDARY MARKET

CONTENTS

Primary Market MeaningWhat is new Issue market ?IPOBook Building

Secondary Market MeaningStock ExchangeSEBI

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

Security Analysis | Primary Market v/s Secondary Market Presentation

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.

Public issues or Initial public offering (IPO)

Security Analysis | Primary Market v/s Secondary Market Presentation

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, 2000.

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

Security Analysis | Primary Market v/s Secondary Market Presentation

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

SEBI Risk Management System

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 development.

Security Analysis | Primary Market v/s Secondary Market Presentation

Process of Trading

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

Process of Trading

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

In primary markets, securities are bought by way of public issue directly from the company.

New issue are available in primary market.

The primary is a middlemen.

New issue of common stock;bonds and preferred stock are sold by companies.

In Secondary market share are traded between two investors.

Securities usually bought and sold through the secondary market.

The secondary market are broker and dealer.

The secondary market stock and bonds issues are sold to the public.

Primary market

Secondary market

Security Analysis | Primary Market v/s Secondary Market Presentation

ConclusionThe 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

Udesh Poojary

58(FM.12.56)

22(FM.12.22)

SIES College, Nerul, Navi MumbaiS.Y.Bfm