1.​ What is meant by the Secondary market?

​
The Secondary Market is where people buy and sell shares and bonds after they have
been issued in the primary market.
●​ When a company first sells shares to the public, it happens in the Primary Market
(like an IPO).
●​ After that, these shares can be traded between investors in the Secondary Market
(like the stock exchange).
●​ This means you are buying shares from other investors, not directly from the
company.
●​ It provides liquidity, so investors can buy and sell shares whenever they want.
●​ It determines the market price of shares based on demand and supply.

In simple words, the Secondary Market is like a resale shop for stocks and bonds,
where investors trade among themselves after the initial sale.

2.​ What is the role of the Secondary Market?​

The Secondary Market plays an important role for both investors and companies.
●​ It provides a platform to buy and sell shares easily after they are issued.
●​ Investors can convert their shares into cash whenever they want.
●​ It helps investors track the value of their investments as stock prices change
based on demand and supply.
●​ It helps companies understand their stock’s market value (price discovery).
●​ It allows companies to attract investors because they know they can sell their
shares later.
●​ It ensures good management practices since share prices reflect company
performance, encouraging better decision-making.

In simple words, the Secondary Market is like a stock marketplace where investors
trade shares freely, making it easier to invest, exit, and track company performance.

3.​ What is the difference between the Primary Market and the Secondary Market?​
The Primary Market and Secondary Market are two different stages of trading securities.

Primary Market:

●​ This is where new shares are issued by a company to raise money.

●​ Investors buy shares directly from the company (e.g., through an IPO).
●​ The money raised goes to the company for business expansion or projects.

Secondary Market:

●​ This is where already issued shares are traded among investors.

●​ Investors buy and sell shares from each other (not from the company).
●​ The company does not receive any money from these trades.

Example: Buying shares in an IPO = Primary Market, while buying shares on a stock
exchange like NSE/BSE = Secondary Market.
4.​ What is the role of a Stock Exchange in buying and selling shares?​
A Stock Exchange is a place where people buy and sell shares of companies.
●​ It works under SEBI’s supervision to ensure fair trading.
●​ It provides a safe and organized platform for trading shares.
●​ In India, stock exchanges like NSE and BSE allow investors to trade online.
●​ Buyers and sellers don’t need to meet physically—they trade through computers or
the internet.

Example: If you want to buy shares of a company, you can place an order through a broker,
and the stock exchange will match you with a seller.

5.​ What is Demutualisation of stock exchanges?​

Demutualisation of a stock exchange means separating its ownership, management, and
trading rights.

Earlier, stock exchanges were owned and controlled by brokers who also traded there. After
demutualisation:

●​ Ownership is with shareholders (not just brokers).

●​ Management is handled by a professional team.
●​ Trading rights are separate from ownership, so all investors can trade fairly.

Purpose: To make stock exchanges more transparent, fair, and independent from trader
influence

6.​ How is a demutualised exchange different from a mutual exchange?​

In a mutual exchange, brokers own, manage, and trade on the exchange. This can create
conflicts of interest because the same people who trade also make the rules.

✅
In a demutualised exchange, these three functions are separate:​

✅
Ownership is with shareholders (not just brokers).​

✅
Management is handled by professionals.​
Trading is open to all investors, ensuring fairness.

Key Difference: A demutualised exchange is more transparent and fair since trading and
rule-making are kept separate.

7.​ What is Screen Based Trading?​

Screen-Based Trading (SBTS) is a computerized system for buying and selling stocks.

🔹 Before SBTS: Trading was done through open outcry, where traders shouted
🔹 With SBTS:​
bids and offers, making the process slow and inefficient.​

✅ Orders are entered into a computer system.​

✅ The system automatically matches buy and sell orders.​
✅ Trading is faster, more transparent, and accessible from anywhere in the
country.

This system makes stock trading efficient, fair, and convenient for investors.
8.​ What is NEAT?​
NEAT (National Exchange for Automated Trading) is the computerized trading system
used by the National Stock Exchange (NSE) of India.

🔹 It is a fast and efficient system that allows traders to buy and sell stocks
🔹 Uses satellite technology for quick and reliable trading.​
electronically.​

🔹 Stores all trading data in real-time, making transactions super fast (response
🔹 Has a 99.7% uptime, ensuring smooth and continuous trading.
time is less than 1 second).​

This system replaces manual trading, making stock market transactions faster,
transparent, and hassle-free.

9.​ How does an investor get access to an internet based trading facility?​
Investors can trade stocks online through brokers who offer internet-based trading
services.

🔹 Find a Broker: Choose a broker registered with NSE that provides online trading.​
🔹 Open an Account: Register and get login details for the broker’s online platform.​
🔹 Access from Anywhere: Trade from your home, office, or anywhere with an
🔹 Buy/Sell Stocks: Use the broker’s website or mobile app to place orders easily.
internet connection.​

This makes investing convenient, fast, and accessible from any location!

10.​ What is a Contract Note?​

A Contract Note is a legal document that confirms the trades (buying or selling of stocks)
done on behalf of an investor by a stockbroker on a particular day.

🔹 Proof of Trade: It acts as a receipt and legal proof of the transaction.​

🔹 Details of Trade: Includes information like stock name, price, quantity, and date.​
🔹 Legal Protection: Helps resolve disputes between the investor and broker.​
🔹 Signed & Stamped: Must be properly signed and stamped to be valid.​
🔹 Kept in Duplicate: One copy is kept by the broker, and the other by the investor.
If there is any issue, the investor can use the contract note for filing complaints or arbitration.

11.​ What details are required to be mentioned on the contract note issued by the stock
broker?​
A Contract Note issued by a stockbroker must include the following details:

🔹 Broker's Information: Name, address, SEBI registration number, and contact details.​
🔹 Authorized Signatory: Name of the broker’s partner, proprietor, or authorized person.​
🔹 Trade Details:
●​ Contract number and date
●​ Settlement number and settlement period
●​ Client’s name and unique code
●​ Order number and time
 ●​ Trade number and trade time

🔹
●​ Quantity and type of stock bought/sold​
Financial Details:
●​ Price at which the stock was bought/sold
●​ Brokerage fees

🔹
●​ Service tax, Securities Transaction Tax (STT), and any other charges​
Stamp & Signature: Must have a valid stamp or mention of consolidated stamp
duty paid and be signed by the broker.

This document serves as proof of the transaction and helps in case of any disputes.

12.​ Why should one trade on a recognized stock exchange only for buying/selling
shares?​
It is safer to trade on a recognized stock exchange because:

✔ Fair Prices – You get the best market price at the time of buying or selling.​
✔ No Risk of Default – The clearing corporation ensures that both buyers and
sellers fulfill their commitments.​
✔ Investor Protection – If there is a problem, you can seek help from the stock
exchange’s dispute resolution system.​
✔ Compensation for Losses – The Investor Protection Fund provides some
financial safety in case of broker defaults.

If you trade outside a stock exchange, you don’t get these protections, which can lead to
losses or fraud.

13.​ What precautions must one take before investing in the stock markets?​
Before investing in the stock market, follow these precautions:​
✔ Check Your Broker – Make sure your broker is registered with SEBI and the stock
exchange. Avoid unregistered agents.​
✔ Get Proof of Transactions – Always ask for a contract note from your broker within a
day of trading.​
✔ Understand the Risks – Every investment has risks. Invest based on your risk-taking
ability.​
✔ Ignore Rumors & Tips – Don’t blindly trust market rumors, flashy ads, or “hot stock tips.”​
✔ Research the Company – Check its business, future plans, management, and past
performance. Use sources like annual reports, financial news, and advisors.​
✔ Be Careful with Unknown Stocks – If someone suggests a stock you’ve never heard of,
investigate it before investing.​
✔ Don’t Get Carried Away by Hype – A sudden price rise doesn’t always mean a stock is
good.​
✔ Avoid Penny Stocks – Very low-priced stocks don’t guarantee high returns and can be
risky.​
✔ Beware of Quick-Rich Schemes – If an investment promises huge returns in a short
time, it’s likely a scam.​
Always do your own research before putting your money into any stock!​
14.​ What Do’s and Don’ts should an investor bear in mind when investing in the stock

✅ Do’s (Things You Should Do)

markets?​

✔ Check Broker’s Registration – Make sure your broker/sub-broker is registered with

SEBI.​
✔ Sign a Broker Agreement – Set clear terms and conditions in writing.​
✔ Complete KYC (Know Your Client) Form – Provide your details properly.​
✔ Read the Risk Disclosure Document – Understand the risks before investing.​
✔ Insist on a Contract Note – It confirms your trade details and should be received within
24 hours.​
✔ Verify Your Trades – Cross-check your transactions on the NSE website
(www.nseindia.com) under the "Trade Verification" facility.​
✔ Make Payments Correctly – Pay via account payee cheque or demand draft in the
broker’s name (as per the contract note).​
✔ Check Broker’s Statements – Get regular statements of your funds and securities
and verify them.​
✔ Receive Payments/Deliveries on Time – Your broker should pay you or deliver
securities within one working day of the payout date.​
✔ Keep Your Transactions Personal – Use only your own bank account and Demat
account for transactions.​
✔ Monitor Your Demat Account – If you give Power of Attorney (PoA), ensure it is for a
registered intermediary and only for necessary transactions. Check your DP statements
regularly.​
✔ Report Issues Immediately – If you find any wrong transactions, report them in

❌
writing to your broker and keep proof.​

🚫
Don’ts (Things You Should Avoid)​
Don’t Sign Blank Forms – Never sign a blank delivery instruction slip (DIS) or any

🚫
document.​

🚫
Don’t Trade for Others – Do not trade using someone else’s money or name.​
Don’t Fall for Fixed Returns Promises – No legal broker or intermediary can guarantee

🚫
fixed returns.​
Don’t Trust Unauthorized Portfolio Managers – Only SEBI-approved firms can provide

🚫
Portfolio Management Services (PMS).​
Don’t Delay Payments or Deliveries – Always pay on time and deliver securities to

🚫
your broker properly.​
Don’t Accept Duplicate or Unsigned Contract Notes – Ensure contract notes are

🚫
signed by an authorized person.​
Don’t Use Someone Else’s Client Code – Always trade under your unique client

🚫
code.​
Don’t Ignore Complaints – If your broker doesn’t resolve a dispute, report it to the

🚫
Investor Services Cell of NSE.​
Don’t Trade Without Knowing the Rules – Always read stock exchange and SEBI
guidelines before investing.​
Following these precautions will help you trade safely and avoid frauds in the stock
market. ​
15.​ What are the products dealt in the Secondary Markets?​
Products in the Secondary Market​
The secondary market deals with shares and bonds, which investors buy and sell after they
are issued in the primary market. Here’s a simple breakdown:​
1️⃣ Shares (Stocks)​
These represent ownership in a company. Different types include:​
✔ Equity Shares – Also called ordinary shares, they give you ownership in a company
and a share in its profits (dividends).​
✔ Rights Issue (Rights Shares) – When a company needs more money, it offers extra
shares to its existing shareholders at a special price. For example, a 2:3 rights issue at
₹125 means that for every 3 shares you own, you can buy 2 more shares at ₹125 each.​
✔ Bonus Shares – Free shares given by a company to its shareholders based on how
many shares they already own.​
✔ Preference Shares – These shares pay a fixed dividend before any payments are
made to equity shareholders. However, preference shareholders don’t get voting rights
like equity shareholders.​
✔ Cumulative Preference Shares – If a company skips paying dividends, the unpaid
amount accumulates and must be paid later before any dividend is given to equity
shareholders.​
✔ Cumulative Convertible Preference Shares (CCPS) – These are cumulative
preference shares that can later be converted into equity shares after a certain period.

2️⃣ Bonds (Debt Instruments)​

Bonds represent a loan given by investors to companies or the government. The company
or government pays interest to bondholders and returns the money at maturity. Types
include:​
✔ Bonds – These are general debt instruments where the investor lends money and
receives interest regularly until the bond matures.​
✔ Zero Coupon Bonds – These bonds don’t pay regular interest. Instead, they are sold
at a lower price and repaid at full face value upon maturity. The profit is the difference
between the buying price and maturity value.​
✔ Convertible Bonds – These bonds can be converted into equity shares at a fixed price
after a certain period.​
✔ Treasury Bills (T-Bills) – Short-term (up to 1 year) bonds issued by the government to
raise money. They are sold at a discount and repaid at full value.​
These financial instruments help investors grow wealth while companies and
governments use them to raise funds. ​

16.​ Why should one invest in equities in particular?​

When you buy shares of a company, you become a part-owner of that company. Shares
are also called equities, and they have the potential to increase in value over time.​
Benefits of Investing in Equities:​
✔ Higher Returns Over Time – Research shows that equities have given better returns
than most other investment options in the long run.​
✔ Wealth Growth – If you stay invested in good stocks for many years, your money can
grow significantly. For example, in the last 15 years, the Nifty index has given an average
annual return of around 16%.​
 ✔ Outperform Other Investments – Some stocks have performed far better than
traditional investments like fixed deposits, gold, or bonds over a long period.​

❗
Risks of Investing in Equities:​
High Risk, High Reward – While equities can give high returns, they are also risky. If

❗
the stock price falls, you may lose some or all of your money.​
Need for Research – Not all stocks give high returns. Before investing, it is important to
study the stock market, company performance, and future growth potential.​
In short, equities are a great way to build wealth over time, but they come with risks.
Investing wisely and staying informed is the key to success.​

17.​ What has been the average return on Equities in India?​

If we look at the Nifty index (a key stock market indicator) over the past 15 years, the

📈
average return for investors has been around 16% per year.​
Returns come in two ways:​
1️⃣ Increase in Share Prices – This is called capital appreciation, meaning your investment
grows as stock prices rise.​
2️⃣ Dividends – On average, companies pay around 1.5% per year as dividends, which is a
share of their profits given to investors.​
Compared to other investments like fixed deposits, gold, or bonds, equities have provided
the highest returns over a long period. However, investing in stocks requires patience and
knowledge, as stock prices can go up and down.​

18.​ Which are the factors that influence the price of a stock?​
The price of a stock is influenced by two main factors:

1️⃣ Stock-Specific Factors (Company-Related) 📊

●​ Investors look at a company’s future growth, financial health, management
quality, technology, and marketing strategies.
●​ If people expect the company to perform well in the future, its stock price goes up. If
they doubt its success, the price goes down.

2️⃣ Market-Specific Factors (Overall Economy) 🌍​

●​ Sometimes, stock prices move due to market sentiment rather than a company’s
performance.
●​ Positive events like a strong economy, stable government, or investor-friendly
policies can boost stock prices.
●​ Negative events like war, financial crisis, or political instability can lead to a
stock market decline.

Short-term price changes can be due to market events, but in the long run, a stock’s value
depends on the company’s actual performance. So, investors should research and
invest wisely instead of just guessing or speculating.

19.​ What is meant by the terms Growth Stock/Value Stock?​

Growth Stocks:
●​ These are companies that are growing quickly in terms of sales and profits.
 ●​ They usually don’t pay dividends because they reinvest profits to expand their
business.
●​ Investors buy these stocks expecting the price to increase significantly in the
future.
●​ Example: Tech companies like Apple, Tesla, or startups with high growth
potential.

💰 Value Stocks:
●​ These are stocks that are undervalued or ignored by most investors.
●​ The company might be going through temporary problems, making its stock price
lower than its true worth.
●​ Value investors buy these stocks at a discount, believing the price will rise when
the market realizes their true value.
●​ Example: Companies with strong assets but low stock prices, like some banks
or old manufacturing firms.

📌 Key Takeaway:
●​ Growth stocks = High potential, reinvest profits, riskier but bigger rewards.
●​ Value stocks = Undervalued gems, lower risk, good for long-term investors.​

20.​ How can one acquire equity shares?​

you can buy shares in two ways:

1️⃣ Through IPOs (Primary Market):

●​ Companies issue new shares to raise money. This is called an Initial Public
Offering (IPO).
●​ You can apply for these shares when they are first offered to the public.

2️⃣ Through the Stock Market (Secondary Market):

●​ If you missed buying in an IPO, you can buy shares from other investors on the
stock exchange.
●​ To do this, you need to open a trading account with a SEBI-registered broker.
●​ You can then buy and sell shares online or through your broker.

📌 Key Takeaway:
●​ IPOs = Buying new shares directly from companies.
●​ Stock Market = Buying existing shares from other investors.
●​ You need a trading account and a broker to start investing. ​

📌
21.​ What is Bid and Ask price?​
Bid Price (Buyer's Price):
●​ This is the highest price a buyer is willing to pay for a stock.
●​ If you want to sell a stock, this is the price you’ll get.

📌 Ask Price (Seller's Price):

 ●​ This is the lowest price a seller is willing to accept for a stock.
●​ If you want to buy a stock, this is the price you’ll pay.
●​ A smaller spread means the stock is highly traded and easy to buy/sell (more
liquid).
●​ A bigger spread means the stock is less traded and may take longer to buy/sell.
22.​ What is a Portfolio?​
A portfolio is a collection of different investments that an investor owns. The goal of a
portfolio is to grow wealth while managing risks.
●​ Stocks (Shares) – Ownership in companies.
●​ Bonds/Debentures – Loans given to companies or the government.
●​ Mutual Funds – A mix of different stocks and bonds managed by professionals.
●​ Fixed Deposits – Bank savings that earn interest.
●​ Gold, Real Estate, and Art – Other valuable assets that can grow over time.
●​ Helps spread risk – If one investment loses money, others may still perform well.
●​ Helps you achieve financial goals – Like saving for a house, education, or
retirement.​

23.​ What is Diversification?​

Diversification means spreading your money across different investments so that you
don’t put all your eggs in one basket.
●​ Reduces risk – If one investment loses money, others might still perform well.
●​ Balances returns – Some investments may grow fast, while others provide steady
returns.
●​ Protects against market ups and downs – Different investments react differently to
market changes.​

✅
Instead of investing all your money in just one stock, you can:​

✅
Buy stocks from different companies​

✅
Invest in bonds for stability​

✅
Put some money in mutual funds​
Keep some savings in fixed deposits​

24.​ What are the advantages of having a diversified portfolio?​

Having a mix of different investments helps reduce risk and protect your money. Here's

✅
why:​
Less Risk – If one investment loses value, others might still perform well, balancing your

✅
overall returns.​
Steady Growth – Different types of investments (stocks, bonds, real estate, etc.) perform

✅
differently, so you won’t lose everything at once.​
Protection from Market Ups & Downs – When stock prices drop, safer investments like

✅
bonds or gold might stay stable or even increase in value.​
Better Long-Term Returns – Over time, a balanced portfolio can grow steadily without

📌
huge losses.​
Example: If you invest only in tech stocks, a crash in the tech sector could wipe out
your savings. But if you also invest in bonds, healthcare stocks, and gold, your losses in
one area might be balanced by gains in another.​

25.​ What is a ‘Debt Instrument’?​

A debt instrument is a way for one person or company to lend money to another, with a
 🔹
promise to be paid back later. The borrower agrees to:​

🔹
Pay interest at a fixed rate and time (monthly, yearly, etc.).​
Return the full amount (principal) after a set period.​

✅
In India, different names are used:​

✅
Bonds – Issued by the government or public sector companies.​
Debentures – Issued by private companies.​

26.​ What are the features of debt instruments?​

Debt instruments (like bonds or debentures) have three main features:​
1. Maturity​
📅 Maturity date is when the borrower must repay the money to the lender.​
📆 Term-to-Maturity means how many years are left before the bond matures.​
2. Coupon (Interest Rate)​
💰 Coupon is the interest payment made by the borrower (bond issuer) to the lender
📊 Coupon Rate is the percentage of interest paid, based on the bond’s value.​
(bondholder).​

3. Principal (Face Value)​

💵 Principal is the amount borrowed (also called par value or face value).​
💡 Formula: Coupon Payment = Principal × Coupon Rate​
💰
27.​ What is meant by ‘Interest’ payable by a debenture or a bond?​
Interest is the payment made by the borrower (the company or government) to the

📅
lender (the debenture-holder or bondholder) for using their money for a fixed period.​
How often is interest paid?​
Interest can be paid annually, semi-annually, quarterly, or monthly depending on the

📊
bond's terms.​
How is interest calculated?​
Interest is usually based on the face value of the bond (the amount printed on the bond
certificate).​

28.​ What are the Segments in the Debt Market in India?​

The debt market in India has three main parts:

1️⃣ Government Securities (G-Secs)

●​ Issued by the Central & State governments to raise funds.

●​ Includes bonds from local bodies like municipalities.
●​ Mostly not tax-free.

2️⃣ Public Sector Unit (PSU) Bonds

●​ Issued by government-owned companies (PSUs).

●​ Some PSU bonds are tax-free, while others are not.

3️⃣ Corporate Bonds

●​ Issued by private companies to raise money.

●​ Includes commercial paper (short-term borrowing).
 ●​ Designed to meet the needs of both investors and companies, offering flexible
interest payments and repayment options.​

29.​ Who are the Participants in the Debt Market?​

The debt market mostly involves big investors because trades happen in large amounts.
The main participants are:​
1️⃣ Banks – Lend and invest in bonds to earn steady returns.​
2️⃣ Financial Institutions – Large organizations that provide funding and invest in debt
securities.​
3️⃣ Mutual Funds – Invest in bonds on behalf of individual investors.​
4️⃣ Provident Funds – Retirement savings funds that invest in safe debt instruments.​
5️⃣ Insurance Companies – Invest in bonds to ensure steady returns for policyholders.​
6️⃣ Corporates (Companies) – Buy and sell bonds for investment or funding business needs.​
Since the transactions involve huge sums of money, the debt market is mostly for large
financial institutions rather than individual investors.​