As a new investor in the stock market, Arjun wants to understand about the primary and the secondary market.

As a new investor in the stock market, Arjun wants to understand about the primary and the secondary market. So he asks his friend Vijay, who is an active trader in the stock market to make him understand about these types of market. Therefore Vijay tells him that the primary market is the one where stocks are created whereas the secondary market is the one where stocks are traded. When a company decides to go public for the first time by raising IPO, it is done in the primary market where a company sells its shares directly to the investors.

For example, in the primary market Arjun will buy the stocks from the company directly whereas in the secondry market Arjun will buy and sell from the other traders present in the market. In the primary market prices are often volatile as the demand of the first issued share is very difficult to predict whereas in the secondary market as the supply and demand fluctuates, the volume traded of the security also varies from day to day which has a big effect on the price of the security.In the primary market, Arjun will buy the shares from underwriters who act as an intermediary whereas in the secondary market, Arjun will buy and sell from the brokers who serve as intermediary in the secondary market. In the secondary market, the company is not directly involved in the transaction whereas in the primary market the company is involved. For example if you go to buy Reliance stock, you are dealing only with another investor who owns shares in Reliance. Reliance is not directly involved with the transaction. In the primary market the security can be sold only once whereas in the secondary market the security is bought and sold many times.

The primary market mainly supplies funds to the companies who want to diversify and expand whereas secondary market does not provide funds to the enterprise. Arjun understood the difference between primary and secondary market and now he is a step ahead for starting trading in the stock market. Thank You for watching the video!