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When a company offers its shares to the public for the first time, the issue is called:

  1. A.A rights issue
  2. B.A follow-on public offer
  3. C.An initial public offering
  4. D.A private placement

Correct answer

C. An initial public offering

Explanation

The correct answer is C, an initial public offering. An IPO is the first sale of shares by a company to the general public, after which the shares are listed and traded on a stock exchange; it belongs to the primary market, because the money raised goes to the company itself. Option A, a rights issue, is an offer of new shares made only to existing shareholders, usually in proportion to their holding and at a stated price. Option B, a follow-on public offer, is a further issue to the public by a company that is already listed, so it cannot be the first one. Option D, a private placement, is an issue to a small number of selected investors, often financial institutions, without a public offer; when the investors are qualified institutional buyers it is called a qualified institutional placement.

Read the full article: Capital Market, SEBI and Stock Exchanges in India

Practice Questions

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Q1.Indian EconomyAsked in: Delhi · 7 Dec 2020, Shift 2Easy

In which of the following years was the Securities and Exchange Board of India (SEBI) established by the government of India to protect the interests of investors in securities and to promote and regulate the securities market?

  1. A.1992
  2. B.1999
  3. C.1987
  4. D.1985
Show answer
Correct answer: A. 1992

SEBI first appeared in April 1988 as an administrative arrangement with no legal powers, and it became a statutory regulator when the Securities and Exchange Board of India Act was passed in 1992; the words quoted in the question are taken from the preamble of that Act, which speaks of…

Q2.Indian EconomyEasy

Which is the oldest stock exchange in Asia?

  1. A.National Stock Exchange
  2. B.Bombay Stock Exchange
  3. C.Calcutta Stock Exchange
  4. D.Madras Stock Exchange
Show answer
Correct answer: B. Bombay Stock Exchange

It was founded in 1875 as the Native Share and Stock Brokers’ Association, grew out of brokers meeting under a banyan tree in Bombay, and is the oldest stock exchange in Asia; it now stands on Dalal Street and its benchmark index is the Sensex.

Q3.Indian EconomyEasy

How many companies make up the BSE Sensex?

  1. A.20
  2. B.30
  3. C.50
  4. D.100
Show answer
Correct answer: B. 30

The Sensex, or Sensitive Index, of the Bombay Stock Exchange is built from thirty large, well established and actively traded companies drawn from the main sectors of the economy, and it is weighted by free-float market capitalisation.

Q4.Indian EconomyMedium

The base year of the BSE Sensex is:

  1. A.1950-51
  2. B.1978-79
  3. C.1993-94
  4. D.2011-12
Show answer
Correct answer: B. 1978-79

The Sensex was compiled backwards to 1978-79 and that year was given a base value of 100, so the index number states how many times the market value of its thirty constituents has grown since then.

Q5.Indian EconomyMedium

The money market in India is regulated by which authority?

  1. A.SEBI
  2. B.The Reserve Bank of India
  3. C.The Ministry of Corporate Affairs
  4. D.IRDAI
Show answer
Correct answer: B. The Reserve Bank of India

The money market deals in short-term funds of up to one year, through treasury bills, commercial paper, certificates of deposit and call money, and the Reserve Bank regulates it as part of its control over credit and liquidity.