Question

Name the two segments of capital market.

Answer 1

Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying and selling are undertaken by participants such as individuals and institutions.

Capital markets help to channelize surplus funds from savers to institutions which then invest them into productive use. Generally, long-term securities take place in this market. The capital market is bifurcated in two segments, primary market and secondary market:

a) Primary Market: Otherwise called as New Issues Market, it is the market for the trading of new securities, for the first time. It embraces both initial public offering and further public offering. In the primary market, the mobilisation of funds takes place through prospectus, right issue and private placement of securities.

b) Secondary Market: Secondary Market can be described as the market for old securities, in the sense that securities which are previously issued in the primary market are traded here. The trading takes place between investors, that follows the original issue in the primary market. It covers both stock exchange and over-the counter market.