What is a primary market?

The primary market is a financial market where new securities (such as stocks, bonds, and other financial instruments) are issued and sold to investors for the first time. It serves as the initial platform for raising capital for corporations, governments, or other entities by offering new shares or debt instruments to the public.

Key features of the primary market include:

• Issuance of new securities: Companies or governments issue securities to raise funds.
• Direct transfer of funds: Investors buy securities directly from the issuer, not from other investors.
• Underwriting: Investment banks or financial intermediaries often underwrite these securities to ensure their sale.
• Long-term financing: Primarily used for long-term capital needs, such as expansion or infrastructure projects.

Examples include Initial Public Offerings (IPOs) and Right Issues, where companies sell shares to the public for the first time. This market plays a crucial role in economic growth by facilitating capital formation.