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Primary Market is the market for new long term capital. The primary is that part of the capital markets that deals with the issuance of new securities.

It is the market in which a security is sold for the first time and is therefore also referred to as the New Issue Market (NIM). In a primary issue, the securities are issued by the company directly to investors.

The company receives the money and issues new securities certificates to the investors. The process of selling new issues to investors is called underwriting.

Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy.

It is through this market that the savings of surplus units are channelled to the deficit units which utilize these funds for investment in buildings, plants, machinery, purchase of technology, etc.

Features of Primary Market are:-

1. This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM).

2. In a primary issue, the securities are issued by the company directly to investors.

3. The company receives the money and issue new security certificates to the investors.

4. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.

5. The primary market performs the crucial function of facilitating capital formation in the economy

6. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as ‘going public’.

Methods of issuing securities in the Primary Market:-

1. Initial Public Offer;

2. Rights Issue (For existing Companies); and

3. Preferential Issue.

The capital market is the market for medium and long term funds. It refers to all the organizations, institutions and instruments that provide long term funds.

The organizations and institutions which constitute the capital market include the new issue market, the stock exchange, the mutual funds, insurance companies, investment banks.

The capital market mainly focuses on meeting long term financial needs of the business sector.

Global Market In Hand

The business enterprise utilizes this market to procure finances for long term investments, such as buying plant ,machinery ,buildings, etc. funds in the capital market are raised by issuing a wide variety of securities which includes :-

• Equity shares or ownership securities
• Debentures or creditor ship securities
• Preference shares or securities having preferential claims
• Other innovative securities which are variant s securities, with new features added to provide a wider choice to investors.

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