L1 · Starter: How Markets Work / Money Basics
X0017
Primary vs Secondary Market
Arjun bought a share yesterday. The company never got a single rupee of his money. So who did?
In the primary market, a company sells new shares and gets the money; in the secondary market, investors trade with each other.
The story
Arjun has just bought 10 shares of the tiffin-café chain on his app. He's grinning.
Arjun: Meera! I just funded the café chain. My ₹1,300 is building a branch!
Meera: Is it? Who sold you those shares?
Arjun: The company?
Meera: Not today. Today you bought from another investor, maybe someone who got them earlier. Your ₹1,300 went to that person.
Arjun: Wait… so the company got nothing?
Meera: Not from this trade. The company got money once, when it first sold new shares to the public. That's the primary market, like an IPO.
Arjun: And today's buying and selling?
Meera: That's the secondary market. Investors swapping shares with each other on the stock exchange.
Arjun: Then why should the company care about the secondary market?
Meera: Because nobody would buy in an IPO if they could never sell later. Let's follow the money.
What you just saw
When new shares are made, the money goes to the company: the primary market.
After listing, shares change hands between investors: the secondary market.
Buying or selling in your trading app is the secondary market. Applying for an IPO is the primary.
Primary = company sells new shares. Secondary = investors trade with each other.
This lesson has its own hands-on lab: Primary or secondary market?.