Primary and Secondary Market in Stock Market

Well stock market can be defined as the market in which shares are issued and traded either through exchanges or over-the-counter markets. Stock market is like a barometer for the economy of the country. A rising stock market normally implies economy is booming and declining market mean that there may be some problem in economy. It is also known as the equity market, it is one of the most crucial areas of a economy as it present companies with access to capital and investors with a fraction of ownership in the company and the prospective of gains based on the company’s future performance. The equity market can be divided into two categories –

1. Primary Market – It is a market where new issues of the companies are first offered to the public directly through initial public offering also known as IPO, in other words company directly sell its shares to the investors.

2. Secondary Market – It is a market where previously issued securities are bought and sold, in other words in these market there is no interference of company and investors trade among themselves and hence it is highly liquid market.

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