Primary vs Secondary Market

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 Primary Market – The First Sale (Where Shares Are Born)

What is it?

The Primary Market is where a company sells its shares to the public for the very first time — through something called an IPO (Initial Public Offering).

Think of it as:

"The birth of a share."

Simple Example:

Imagine a company called Moat In You Inc.
It needs ₹100 crore to launch a personal finance platform across India. So, instead of borrowing all of it from a bank, it decides to go public.

So, Moat In You Inc. launches an IPO – and offers 1 crore shares at ₹100 each.

You, as a retail investor, apply to buy 100 shares in the IPO. If you’re allotted those shares, you’ve bought them directly from Moat In You Inc. This money goes to the company.

✅ Key Point:
The company gets the money, and you get newly issued shares. This is Primary Market.

🔄 Secondary Market – Where Trading Happens (Share Bazaar)

What is it?

Once shares are sold in the Primary Market (via IPO), they start trading on stock exchanges like NSE or BSE. This is the Secondary Market – where investors buy and sell from each other, not from the company.

Think of it as:

"Second-hand shop for shares."

Example Continued:

Now you own 100 shares of Moat In You Inc. After a month, you think the price might fall, so you decide to sell your shares on the stock exchange.

Another investor named Rahul sees potential and buys your 100 shares at ₹120 each.

In this case:

  • You get the money (₹12,000)

  • Rahul gets the shares

  • Moat In You Inc. gets nothing — because they already raised money during the IPO

✅ Key Point:
This trading between investors is the Secondary Market.

Demystifying IPOs: What Really Happens

🛠️ Why Companies Do IPOs:

  • To raise large amounts of money

  • To increase their public profile

  • To allow early investors to cash out

🧱 IPO Process (In Simple Steps):

  1. Company prepares paperwork and gets SEBI approval

  2. Price band is announced (e.g., ₹95 to ₹105)

  3. Investors apply during IPO window (usually 3 days)

  4. Shares are allotted based on demand

  5. Shares list on the stock exchange

  6. Trading begins in the Secondary Market


🧾 Summary Table:

FeaturePrimary MarketSecondary Market
What happens?Company sells shares for the first timeInvestors trade among themselves
ExampleIPO of Moat In You Inc.You sell shares of Moat In You on NSE
Money goes toThe CompanyThe Investor (who sells the share)
Key EventIPO (Initial Public Offering)Buying/Selling on Stock Exchange
Risk LevelDepends on IPO quality (can be high risk)Depends on market movement & price

💬 Final Thoughts (in Plain Speak):

  • The Primary Market is like buying a brand-new phone from the company.

  • The Secondary Market is like selling that phone to someone else on OLX or Amazon.

Both markets are crucial parts of how the stock market works — and understanding the flow from IPO to daily trading helps you become a more confident investor.

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