What is the New Issue Market? What are the Main Functions of the New Issue Market?

What is the New Issue Market?

Friends, if you’ve had a lot of touch with the financial world, you’ve probably all learned many things about the market. A market is a place where there is an exchange of funds happens between the company and its shareholders.

Well, the financial market is actually divided into the main two-part, the first one is obviously the capital market and the second one is definitely the secondary market.

However, today in this article, we are going to share some important information related to the new issue market in detail. If you are also someone who is also looking for the same then kindly read this article till the end.

What is the New Issue Market?

The New Issue Market or NIM is also called the primary capital market. The securities which are introduced in the market are sold for the first time to the general public in this market. This market is also known as the long-term debt market as the fund raised from this market provides long-term capital.

When corporate companies need money to expand their business, all those companies ask for money through IPO from the people, and this process is usually done in the primary market.

Corporate entities may raise capital in the primary market by way of an initial public offer, rights issue, or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book-building method, or a combination of both.

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In India, there are two types of industrial securities markets: the new issue market and the stock exchange. The new issue market deals with new securities that have never been issued to the investing public before, i.e. securities that are being sold for the first time.

As a result, the market puts a new block of securities available for public subscription. In other words, the new issue market is concerned with corporations issuing additional capital for cash or non-monetary consideration.

The new issue market encompasses all institutions dealing in the fresh claims. The forms in which these claims are created are equity shares, preference shares, debentures, rights issues, deposits, etc. All financial institutions, which contribute, underwrite, and directly subscribe to the securities, are part of new issue markets.

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We really hope you have definitely learned so many things about this concept and you liked this article as well. Now, we are definitely moving ahead to the next part of this article which is the functions of the new issue market.

Functions of the New Issue Markets

Friends, as we all know very well that in today’s time everyone wants to earn a good return on their savings and this is the main reason why they invest their money in Equity, Debt, Debentures, and Bonds.

So, basically new issue market is the actual place where all they can buy investment securities for the first-ever time for investment purposes. So, from the above statement, we can denote that the main function of the new issue market is a provide a facility to the investors to buy their suitable equity, bond, or debantures.

The New Issue Market’s primary function is to facilitate the ‘transfer of resources from savers to users. The New Issue Market, on the other hand, should not be viewed as a platform solely for the purpose of generating funds for new capital expenditure.

In fact, the market’s tools are also used to offer existing businesses to the public as going concerns, via conversions of existing proprietary enterprises or private firms into public companies.

The best example of the function of the new issue market is an IPO which is also known as Initial Public Offerings. Basically, we will try to understand this concept in deep and detail.

Well, if you invest very actively in the stock market, then you must know very well that whenever the company needs money for the expansion of its business, it will issue its IPO in the market and people virtually buy their offerings and give them their hard-earned money and this process is done completely in the new issue market only.

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Distribution is the sale of securities to ultimate investors; it is a specialized profession that can be conducted by securities brokers and dealers who keep regular and direct touch with the ultimate investors. This triple-service role will determine the New Issue Market’s capacity to meet the growing demands of the expanding corporate sector.

Final Conclusion on New Issue Market

Friends, we really hope that you have liked this article related to  What is the New Issue Market really very much.

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