Which of the following is NOT true about “Primary Market”?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Both buying and selling of securities can take place.
Option (1) It is also known as New Issue market — True of the primary market (Incorrect). Only fresh securities are offered in it, so it is called the new issues market.
Option (2) Both buying and selling of securities can take place. — Not true of the primary market (Correct). Investors only buy here; they cannot resell. When they want to sell, they go to the secondary market, the stock exchange. Buying and selling of existing securities is what the secondary market is for.
Option (3) Securities are sold by the company to the investors directly. — True of the primary market (Incorrect). Funds flow from the investor straight to the company, so this market directly helps capital formation.
Option (4) There is no fixed geographical location of Primary Market. — True of the primary market (Incorrect). An issue is made through a prospectus, an offer for sale or a private placement, not at one fixed place. The secondary market works at a stock exchange.
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. Financial Markets packed its bags from NCERT, but NTA never cancelled its ticket.
NCERT (Pre-rationalised Edition):
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