Share market is a major factor that decides the economic condition of a country. The rise and fall of values of shares in the stock market are the primary concern of all investors. In India, there are two types of share market, namely primary share market and secondary share market. The trading method and reasons for investments differ in these two share markets. Thus, common investors need to have a clear idea about the functions and benefits of these two types of stock market in India.
Two Types of Share Market in India
#1 Primary Share Market
The primary share market is where new investors can gain knowledge about the securities or stocks offered by various reputed corporate companies. The procedure of the share market initiates and gradually gains momentum from the primary share market.
Foremost functions of primary share market:
- This share market is responsible for collecting investments from shareholders, to increase funds of companies or the government. The shares of these organizations are offered in the stock exchange so that more funds can be collected.
- The primary share market issues new securities that investors can buy as their financial assets. Experienced underwriters associated with this market evaluate the selling prices of these securities, which will be quoted to buyers here. They also predict the profits that investors can expect from these securities in the future.
Notable benefits of primary share market:
- It is easier to collect funds at a reasonable cost in the primary share market, which is a beneficial factor for business owners.
- Since the liquidity is much better in the primary market, people find it easier to sell the shares of their companies in the secondary share market as well.
- The prices of shares are fixed in this share market and thus, investors do not need to worry about the fluctuations of stock values or manipulation of prices.
#2 Secondary share market
The secondary share market continues the procedures started in the primary share market. The activities of all buyers and sellers of shares are actually seen in this market. Investors feel more convenient to trade here, as there is no commotion of companies issuing securities. The prices of shares are decided here according to the market trend, for which prices fluctuate a lot here.
Prime functions of secondary share market:
- The secondary share market helps investors in trading with various financial assets, like equities, bonds, and shares of different companies.
- Traders enjoy continuous business activities in this market and they get the opportunity of selling their purchased shares in various stock exchanges operating in India.
- The secondary market exhibits the economic growth of the country, by featuring the actual status of investments and profits of common traders.
Major benefits of secondary share market:
- Investors find it very easy to sell their shares in the secondary market. They can get cash instantly by selling their stocks here whenever they need a large amount of money urgently.
- Since all investments in this share market are protected by the main stock exchange of India, buyers feel a lot secure about their invested money.
- All shares are easily mobilized in this market, as invested money of shareholders is transformed in the form of securities here.
However, both primary and secondary share markets are very important for the economy of India and help people in making profitable investments.