Distinguish Between Primary Market and Secondary Market | 12th HSC Secretarial Practice (S.P.) Chapter 11
The distinction between Primary Market and Secondary Market is a 5-star board exam favourite from Maharashtra State Board (MSBSHSE) 12th Standard HSC Secretarial Practice (S.P.) Chapter 11: Financial Market. Together with Money Market vs. Capital Market, this question is one of the two core distinctions in Chapter 11 and is frequently asked in Question 4 (Distinguish Between) carrying 4 Marks. Below is the complete, textbook-accurate tabular solution strictly aligned with the latest Balbharati Textbook and official board marking scheme.
Board Exam Marking Scheme Tip: Each Distinguish Between question in Q.4 carries 4 Marks (1 mark per valid point). Always present your answer in a neat 3-column table including the Basis of Distinction. Write at least 5 to 6 clear points (starting with Meaning, Mode of Investment, Parties in Action, and Value of Security) to guarantee a full 4 out of 4 score!
Distinguish Between: Primary Market and Secondary Market
| Sr. No. | Basis of Distinction | Primary Market | Secondary Market |
|---|---|---|---|
| 1. | Meaning | The issue of new shares and securities by the company is done in the Primary Market. It is also called the "New Issue Market" (NIM). | The already issued (existing) securities of the company are traded (bought and sold) in the Secondary Market. It is also known as the "Stock Market" or "Stock Exchange". |
| 2. | Mode of Investment | It is the market for direct investment in securities. Securities are acquired directly from the issuing company. | It is the market for indirect investment. Securities are acquired from other existing security holders (investors). |
| 3. | Parties in Action | The parties dealing in this market are the Issuing Company and the Investors. | The parties dealing in this market are only Investors (buying and selling securities amongst themselves; the company is not involved). |
| 4. | Intermediaries | The intermediaries operating in the primary market are Underwriters, Merchant Bankers, Bankers to the Issue, and Registrars. | The intermediaries operating in the secondary market are Security Brokers, Sub-brokers, and Jobbers. |
| 5. | Value of Security | The price of the security in the primary market is fixed / decided by the company (either through Fixed Price Issue or Book Building). | The price of the security in the secondary market is fluctuating, depending upon the market forces of demand and supply. |
| 6. | Listing | In the primary market, securities are issued for the first time and do not require prior listing before issue. | Only those securities that are listed on a recognized Stock Exchange can be traded in the secondary market. |
| 7. | Location | The primary market does not have any fixed geographical location or physical place. | The secondary market has a specific physical location / administrative office (e.g., BSE at Dalal Street, Mumbai). |
| 8. | Capital Formation | It directly promotes capital formation because funds flow directly from savers (investors) to the issuing company for productive use. | It indirectly promotes capital formation by providing liquidity and ready marketability to existing securities. |
Quick Memory Trick to Remember All Points in the Exam
Memory Shortcut (Mnemonic — "MM-PI-VL"):
Remember these 6 easiest points from the Balbharati textbook to write in under 4 minutes:
1. Meaning (New Issue Market for Fresh Securities vs. Stock Market for Existing Securities)
2. Mode of Investment (Direct Investment from Company vs. Indirect Investment from Other Investors)
3. Parties in Action (Company and Investors vs. Only Investors Buying & Selling)
4. Intermediaries (Underwriters & Merchant Bankers vs. Brokers & Jobbers)
5. Value of Security (Price Decided by the Company vs. Price Fluctuates by Demand & Supply)
6. Listing (Prior Listing Not Required vs. Only Listed Securities Can Be Traded)
Key Concept Summary for Objective Questions (Q.1)
- Two Components of Capital Market: The Industrial Securities Market (Capital Market) is divided into two interdependent parts: (1) Primary Market (New Issue Market) and (2) Secondary Market (Stock Exchange).
- Methods of Raising Funds in Primary Market: A company can raise fresh capital in the Primary Market through four methods: (a) Public Issue (IPO & FPO), (b) Rights Issue, (c) Bonus Issue, and (d) Private Placement / Preferential Allotment.
- Order of Markets: Securities always enter the Primary Market first at the time of issue and subsequently move to the Secondary Market for regular trading and liquidity.