Primary Market

This is where the securities are created, means a firm sells its first stock or initial public offering (IPO). The main function of this market is to enable the company to raise long-term funds by making fresh issues of shares. In this market, investors are able to purchase securities from the issuer directly. It marks the launch of a new security enabling shares to attract investors.Such a market is regulated by the Securities and Exchange Board of India (SEBI).

Even if an investment bank sets the securities initial price, most of the money raised goes to the issuer. Investors basically pay less for securities on the primary market than on the secondary market.

Funds raised could be used to start new projects, expand, diversify, modernise existing ones, merge and takeovers, and so on.

The types of primary market include:

• Initial Public Offering or IPO:This market organizes the offering of a new issue that has never been traded on another exchange before

• Rights issue: This is a privilege granted to existing shareholders to subscribe to a new issue of shares in accordance with the company's terms and conditions. Shareholders are given the "right" to purchase new shares in proportion to the number of shares they already own.

• Private placement: A private placement is when a company sells securities to institutional investors and a few select individuals. It aids in raising capital more quickly than a public offering.

• Preferential allotment: Preferential allocation provides business securities to a limited set of investors on a preference basis via a new share offering.

* Offer for sale: Securities are not issued directly to the public under this method but are instead offered for sale through intermediaries such as issuing houses or stockbrokers. In this case, a company sells securities enbloc to brokers at an agreed-upon price, who then resell them to the investing public.