Consider the following statements:
(A) The secondary market helps existing investors to disinvest and fresh investors to enter the market.
(B) In the secondary market, securities are traded, cleared and settled within the regulatory framework prescribed by the RBI.
(C) The primary market facilitates the transfer of investible funds from savers to entrepreneurs seeking to expand existing enterprises.
(D) In the primary market, prices are determined by demand and supply for the security.
(E) The secondary market contributes to economic growth through the process of disinvestment and reinvestment.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (C) and (E) only
(A) The secondary market helps existing investors to disinvest and fresh investors to enter the market. — Correct. The secondary market lets existing investors sell their securities and new investors buy them.
(B) In the secondary market, securities are traded, cleared and settled within the regulatory framework prescribed by the RBI. — Incorrect. The framework is prescribed by SEBI, the body that regulates the securities market.
(C) The primary market facilitates the transfer of investible funds from savers to entrepreneurs seeking to expand existing enterprises. — Correct. The essential function of the primary market is to move investible funds from savers to entrepreneurs who set up new enterprises or expand existing ones.
(D) In the primary market, prices are determined by demand and supply for the security. — Incorrect. In the primary market, prices are decided by the management of the company. Prices set by demand and supply belong to the secondary market.
(E) The secondary market contributes to economic growth through the process of disinvestment and reinvestment. — Correct. When investors sell and reinvest, funds move to the most productive investments. This helps economic growth.
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. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals. …” “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. It also provides liquidity and marketability to existing securities. It also contributes to economic growth by channelising funds towards the most productive investments through the process of disinvestment and reinvestment. Securities are traded, cleared and settled within the regulatory framework prescribed by SEBI. Advances in information technology have made trading through stock exchanges accessible from anywhere in the country through trading terminals. Along with the growth of the primary market in the country, the secondary market has also grown significantly during the last ten years.”
|
