Primary Market

Primary Market refers to the part of the Capital market that deals with the issuance of new Securities. In the primary market, companies, governments, and other entities can raise Capital by selling Shares, Bonds, or other financial instruments directly to investors. This market facilitates the initial sale of Securities, allowing issuers to obtain funds for various purposes, such as expansion, project financing, or debt repayment.

One common method of operating in the primary market is through an Initial Public Offering (IPO), where a Private Company offers its Shares to the public for the first time. For example, when a tech startup decides to go public, it may issue 1 million Shares at $10 each during its IPO, raising $10 million in Capital.

Another example includes government Bonds, where a government issues new Bonds to finance Infrastructure projects. For instance, if a state government needs to build a new highway, it might issue $200 million in Bonds in the primary market, which investors can purchase directly from the government.

In both cases, once the Securities are sold, they can then be traded in the Secondary Market, where previously issued Securities are bought and sold among investors.