Prelims-IAS –ECONOMICS MCQ-22
Because it trades like a stock, an ETF does not have its net asset value calculated everyday like an indexed mutual fund.
An ETF combines the valuation feature, the diversification, of a mutual fund (a mutual fund can be bought or sold at the end of each trading day for its net asset value) with the tradability feature of a stock, which trades throughout the trading day at prices that may be more or less than its net asset value.
- Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange.
- Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.
- Following are the main financial products/instruments dealt in the secondary market:
Rights Issue / Rights Shares
Preferred Stock / Preference shares
Government securities (G-Secs)
- An initial public offering (IPO) is the first sale of stock by a private company to the public.
- IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
- It is part of primary market.
- Bonds are instruments of debt that are typically used by corporates to raise money from investors.
- Masala bonds are rupee-denominated instruments sold only to offshore investors by Indian corporates for raising money from overseas investors.
- They do not face currency fluctuation risks.
- Participatory notes are instruments used for making investments in the stock markets.
- However, they are not used within the country.
- They are used outside India for making investments in shares listed in the Indian stock market.
- That is why they are also called offshore derivative instruments.
- PNs are not completely banned in India, however, stringent measures have been taken by SEBI to regulate them.