Capital Market: Meaning
Capital markets are those market where trading of assets such as bonds, equity and securities take place. Capital markets deal with financial instruments that are having a lock-in period of more than one year.
There are two types of capital markets, namely:
- Â Â Â Primary market
- Â Â Â Secondary market
Primary Market: Meaning
A primary market is a marketplace where corporations imbibe a fresh issue of shares for being contributed by the public for soliciting capital to meet their necessary long-term funds like extending the current trade or buying a unique entity. It plays a motivational part in the mobilisation of savings in the economy.
Multiple types of issues made by the establishment are  – Offer for sale, public issue, issue of Indian Depository Receipt (IDR), bonus Issue, right issue, etc.
Secondary Market: Meaning
A secondary market is a prototype of the capital market where debentures, current shares, options, bonds, treasury bills, commercial papers, etc., of the enterprises are patronised amongst the investors.
The secondary market can be an auction business where the business of bonds is functioned through a dealer market or the stock exchange, usually called over the counter.
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This article is a ready reckoner for all the students to learn the difference between a primary market and secondary market.
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Primary market |
Secondary market |
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 Definition |
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| A primary market is a marketplace where corporations imbibe a fresh issue of shares for being contributed by the public for soliciting capital to meet their necessary long-term funds like extending the current trade or buying a unique entity. | A secondary market is a prototype of the capital market where debentures, current shares, options, bonds, treasury bills, commercial papers, etc., of the enterprises are patronised amongst the investors. |
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 Also known as |
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| New issue market (NIM) | Aftermarket |
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 Purchasing type |
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| Direct purchase | Indirect purchase |
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 Parties of buying and selling |
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| Buying and selling takes place between the company and the investors. | Buying and selling takes place between the investors. |
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 To whom it provides financing |
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| It provides financing to the existing companies for facilitating growth and expansion. | It does not provide any kind of financing. |
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 Intermediaries involved |
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| Underwriters | Brokers |
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  Price levels |
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| Remain fixed | Price level varies with variations in demand and supply |
The above-mentioned is the concept that is elucidated in detail about the difference between a primary market and secondary market for the Commerce students. To know more, stay tuned to BYJU’S.
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