MBA (Finance) – IV Semester, Investment and Portfolio Management, Unit 1.3
Role of Primary Market
Primary market is the medium for raising fresh capital in the form of equity and debt. It mops up resources from the public (investors) and makes them available for meeting the long-term capital requirements of corporate business and industry.
Role of Primary Market
Primary market is the medium for raising fresh capital in the form
of equity and debt. It mops up resources from the public (investors) and makes
them available for meeting the long-term capital requirements of corporate
business and industry. The primary market brings together the two principal
constituents of the market, namely the investors and the seekers of capital.
The savings or surplus funds with the investors are converted into productive
capital to be used by companies for productive purposes. Thus, capital
formation takes place in the primary market. The economic growth of a country
is possible only through a robust and vibrant primary market.
In the secondary market, shares already purchased by investors are
traded among other investors. Operations in the secondary market do not result
in the accretion of capital resources of the country, but indirectly promotes
savings and investments by providing liquidity to the investments in
securities, i.e. the investors have the facility to liquidate their investments
in securities in the secondary market.
