CBSE Class 12 Business Studies NCERT Solutions Chapter 10: Financial Markets

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NCERT Solutions PDF Class 12 PDF

This chapter delves into the crucial concept of Financial Markets for Class 12 Business Studies students. It covers the fundamental differences and interrelationships between primary and secondary markets, explaining how companies raise capital and how existing securities are traded. The solutions also address the number of stock exchanges in India and the settlement cycle in the National Stock Exchange (NSE). Understanding these topics is vital for grasping how financial markets function and their role in the economy. These NCERT Solutions provide clear, step-by-step explanations to help students prepare effectively for their board examinations and develop a strong foundation in business finance.

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Quick info

BoardCBSE
ClassClass 12
SubjectBusiness Studies
Session2026
LanguageEnglish
TypeNCERT Solutions
ChapterChapter 10

Chapter summary

Chapter 10 of the Class 12 Business Studies syllabus focuses on Financial Markets. This section provides NCERT Solutions that clarify the roles of primary and secondary markets in capital raising and trading of securities. It also touches upon the infrastructure of stock exchanges in India and the operational aspects like settlement cycles. These solutions aim to equip students with a clear understanding of the mechanisms that facilitate financial transactions.

Learning outcomes

  • Understand the distinction and relationship between primary and secondary financial markets.
  • Identify the function of primary markets in capital formation for companies.
  • Explain the role of secondary markets in providing liquidity for securities.
  • Recognize the structure of stock exchanges in India.
  • Define and explain the settlement cycle in stock market transactions.

Topics covered

Paper topics

  • Financial Markets
  • Primary Market
  • Secondary Market
  • Capital Raising
  • Securities Trading
  • Stock Exchanges in India
  • Settlement Cycle
  • NSE

Important topics

  • Primary vs. Secondary Markets
  • Functions of Financial Markets
  • Role of Stock Exchanges
  • Settlement Cycle Explanation

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Questions and Solutions

Question 1

Primary and secondary markets
  1. Compete with each other
  2. Complement each other
  3. Function independently
  4. Control each other
Solution: The correct option is (ii) Complement each other. The primary market is where new securities are issued for the first time by companies to raise capital directly from investors, often through an Initial Public Offering (IPO). The secondary market, on the other hand, deals with the trading of these already issued securities between investors. Stock exchanges facilitate this trading in the secondary market. Therefore, the primary market facilitates the initial raising of funds, and the secondary market provides liquidity and a platform for subsequent trading, making them complementary functions essential for a well-functioning capital market.

Question 2

The total number of Stock Exchanges in India is
  1. 20
  2. 21
  3. 22
  4. 23
Solution: The correct option is (iv) 23. While the source mentions 23 stock exchanges in India, it's important to note that regulatory bodies like SEBI periodically update these numbers. As per recent information, the number of recognized stock exchanges in India is 25. However, based on the options provided in the question, 23 is the intended answer.

Question 3

The settlement cycle in NSE is
  1. T+5
  2. T+3
  3. T+2
  4. T+1
Solution: The correct option is (iii) T+2. The settlement cycle refers to the period within which the buyer receives the shares and the seller receives the payment after a trade is executed on the stock exchange. In the National Stock Exchange (NSE), this cycle is typically T+2, meaning the settlement occurs two working days after the trade date (T).

Common mistakes

  • Confusing the roles of primary and secondary markets.
  • Not understanding how securities are traded after initial issuance.
  • Lack of clarity on the settlement process in stock exchanges.

Revision tips

  • Focus on the complementary nature of primary and secondary markets.
  • Memorize the key functions of each market type.
  • Understand the significance of the settlement cycle for investors and the market.
  • Review the number of stock exchanges and their regulatory context.

Practice MCQs

Q1. What is the primary function of the primary market in financial markets?

Q2. Which market deals with the purchase and sale of existing securities?

Q3. The settlement cycle in the NSE is typically:

Q4. How do primary and secondary markets relate to each other?

Frequently asked questions

What is the difference between the primary and secondary markets?

The primary market is where new securities are issued for the first time by companies to raise capital. The secondary market is where existing securities are traded among investors.

How do primary and secondary markets work together?

They complement each other. The primary market allows companies to raise funds, and the secondary market provides liquidity by enabling investors to trade these securities.

What does the settlement cycle refer to in stock trading?

The settlement cycle is the time taken to complete a stock transaction, from the trade date to the actual transfer of securities and funds between buyer and seller. For NSE, it's typically T+2.

What is the significance of the number of stock exchanges in India?

The number of stock exchanges indicates the breadth of the market infrastructure available for trading securities across different regions in India.

Important links

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