Q.Meera bought 200 shares of a company directly from the company when it first went public through its IPO. A year later, she sold all 200 shares to another investor, Kiran, through a recognised stock exchange, at the prevailing market price. Identify which of Meera's two transactions took place in the primary market and which in the secondary market, and explain, for each, where the funds actually flowed.

Buying newly issued shares directly from the company is a primary-market transaction; reselling them to another investor later is a secondary-market transaction.

Step 1 — Classify Meera's first transaction. Meera bought shares directly from the company at its IPO — the company's very first issue of these shares to the public. This is a Primary Market transaction, and the funds Meera paid flowed DIRECTLY to the issuing company, which is exactly why a company conducts an IPO — to raise fresh capital for itself.

Step 2 — Classify Meera's second transaction. A year later, Meera sold her already-held shares to Kiran through a recognised stock exchange. No new shares were created or issued here; an existing security simply changed hands between two investors. This is a Secondary Market transaction.

Step 3 — Trace where the funds went in each case. In the IPO, Meera's payment went to the company itself, in exchange for newly issued shares. In the sale to Kiran, Kiran's payment went to Meera personally — the company received nothing further from this transaction, since it had already received its funds once, at the time of the original IPO. …