India's largest domestic investor Life Insurance Corporation of India has once again come to government's rescue by subscribing 70% of Hindustan Aeronautics ₹4,200 crore Initial Public Offering (IPO).
Which market is being reflected in the above case?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Primary Market
Option (1) Secondary Market — Incorrect. This is the market for buying and selling existing securities.
Option (2) Money Market — Incorrect. This market deals in short-term funds, not in shares offered in an IPO.
Option (3) Primary Market — Correct. The primary market is also called the new issues market. It deals with new securities issued for the first time. An Initial Public Offering (IPO) is the first issue of shares to the public. LIC subscribing to the IPO of Hindustan Aeronautics is a case of the primary market.
Option (4) Depository Market — Incorrect. A depository only keeps securities in electronic form. It is not a market for issuing new shares.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. An IPO is a company’s first day on the public stage, and every investor is watching. NCERT (Pre-rationalised Edition): “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. …” “SECONDARY MARKET The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. …” |