Financial Market Basics

What are the main objectives of a capital issue?

• To promote a new company

• To reduce competition

• To decrease reserves

• To increase taxes

What is the function of origination in the primary market?

• To analyze the nature of the security

• To sell securities to investors

• To manage the Board of Directors

• To predict stock prices

Why did investors initially prefer investing in primary issues?

• They had low subscription rates

• They were backed by mutual funds

• They were government-regulated

• They offered high returns in a short time

What led to the collapse of the primary markets after the initial boom?

• Rampant diversion of money and incompetence

• Lack of demand and supply projections

• Strict regulations by the government

• High credit worthiness of companies

What factors should investors consider before investing in the primary market?

• Product, Litigation, Risk Factors

• Auditor's Report, Statutory Clearance, Investor Service

• Promoter's Credibility, Project Details, Financial Data

• Efficiency of the Management, Project Details, Investor Service

What is one of the principal ingredients of investor protection in the primary market?

• Lack of transparency

• Provision of all the relevant information

• Provision of inaccurate information

• Biased allotment procedures

What was the impact of the South Asian crisis on Indian entrepreneurs?

• Boosted the economy and stock markets

• Made life very difficult as exports failed to take off

• Led to increased transparency in corporate governance

• Resulted in a surplus of funds

What caused the markets to boom again after the ice winter of stock market gloom?

• Software sector and robust companies lifted the market

• Lack of demand for IPOs

• Increased borrowing rates by companies

• Decrease in foreign institutional investments

What did investors do during the Bull Run in the markets?

• Engaged in speculation and serious investing

• Avoided investing in primary issues

• Ignored the market trends

• Focused on long-term investments

What steps have been taken to ensure investor protection in the primary market?

• Price rigging, vanishing companies, lack of transparency

• Project appraisal, underwriting, clearance by SEBI

• Indifferent usage of funds, free pricing of issuers

• Promoter's past performance, management efficiency, product reliability