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Market Analyst
Quick AnswerAn IPO takes place in the Primary Market, where the company issues new shares directly to investors to raise capital. Once the IPO concludes and the shares are listed, they are traded between investors on the Secondary Market (stock exchanges like NSE and BSE) without the company's direct involvement.
To fully grasp how stocks work, you must understand the difference between the primary and secondary markets.
When you apply for an IPO, you are participating in the primary market. You are buying shares directly from the company (or from promoters selling their stake). The money you pay goes directly into the company's bank account to fund its objectives.
Once the IPO shares are allotted and officially listed on the exchange, the primary market phase ends. Now, the stock trades in the secondary market. When you buy shares on the secondary market, you are buying them from another investor, not the company. The price fluctuates second-by-second based on global supply and demand.
Retail investors often chase primary market investments (IPOs) hoping for quick listing gains, but long-term wealth is generally built by holding quality stocks in the secondary market over years.
No, in the secondary market, the company does not make money when the stock price rises. Only the investors holding the shares profit.
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