Read the following passage and answer the question.

The history of the stock market in India goes back to the end of the eighteenth century when long-term negotiable securities were first issued. In 1850 the Companies Act was introduced for the first time bringing with it the feature of limited liability and generating investor interest in corporate securities. The first stock exchange in India was set-up in 1875 as The Native Share and Stock Brokers Association in Bombay. Today it is known as the Bombay Stock Exchange (BSE). This was followed by the development of exchanges in Ahmedabad (1894), Calcutta(1908) and Madras(1937). It is interesting to note that stock exchanges were first set up in major centers of trade and commerce. Until the early 1990s, the Indian secondary market comprised regional stock exchanges with BSE heading the list. After the reforms of 1991, the Indian secondary market acquired a three tier form. This consists of:
• Regional Stock Exchanges
• National Stock Exchange (NSE)
• Over the Counter Exchange of India (OTCEI)

Which of the following options is NOT true in regard to the financial market in India?

• Primary market is also known as "Stock exchange" market.
• Secondary market is called "New issue" market.
• In primary market securities are issued for the very first time.
• Offer through prospectus, offer for sale, private placement, right issue are methods of floating shares in the secondary market.

1, 2 and 4

The correct answer is option 2- 1, 2 and 4.

1. Primary market is also known as "Stock exchange" market. THIS IS INCORRECT as secondary market is known as stock exchange. 
2. Secondary market is called "New issue" market. THIS IS INCORRECT as primary market is known as New issue market.
3. In primary market securities are issued for the very first time. THIS IS CORRECT.
4. Offer through prospectus, offer for sale, private placement, right issue are methods of floating shares in the secondary market. THIS IS INCORRECT as these methods of flotation are in the primary market.

The primary market is also known as the new issues market. It deals with new securities being issued for the first time. The essential function of a primary market is to facilitate the transfer of investible funds from savers to entrepreneurs seeking to establish new enterprises or to expand existing ones through the issue of securities for the first time. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, modernisation of existing projects, mergers and takeovers etc. There are various methods of floating new issues in the primary market-

• Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through the issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines.

• E-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company. The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange.

• Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue. Access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. Some companies, therefore, cannot afford a public issue and choose to use private placement.

• Offer for Sale: Under this method securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the investing public.

• Right issue- This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.