Which of the following is not a feature of the Primary Market?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Prices are determined by demand and supply for the security
Option (1) Prices are determined and decided by the management of the company — A feature of the primary market (Incorrect). The company issuing the new securities fixes their price.
Option (2) Prices are determined by demand and supply for the security — Not a feature of the primary market (Correct). This is how prices are set in the secondary market. On the stock exchange a share’s price rises and falls with the buying and selling of investors.
Option (3) There is sale of securities by companies — A feature of the primary market (Incorrect). New companies, or existing companies issuing new securities, sell them to investors.
Option (4) The flow of funds is from savers to investors — A feature of the primary market (Incorrect). The money of savers goes straight to the companies that invest it, so the primary market directly helps capital formation.
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.
NCERT (Pre-rationalised Edition):
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