What is the difference between BSE and NSE?

“India’s benchmark Sensex index has outperformed the NSE index as of today. The Sensex has gained 2.86% on the day, whereas NSE has gained 2.26%.”

These are the most common headlines of the business section of the morning newspaper or in stock market apps. What are BSE and NSE here?

In this article, we will discuss the difference between BSE and NSE, the two largest stock exchanges in India. However, to study the Bombay Scholarship (NSE) and the National Scholarship (NSE), one must first understand what a scholarship is and its importance. Let’s get started.

Read: Top Debt-Free Companies in India

What is a stock exchange?

Under the Indian Securities Contracts (Regulation) Act, 1956, a stock exchange is defined as an association, organization or group of persons, whether registered or unregistered, established for the purpose of facilitating, regulating and controlling the trading of securities.

The stock exchange is a very important part of the capital market for buying and selling financial and industrial securities and bonds. It is a well-organized and systematic place, subject to strict conditions and rules. The Exchange performs various functions and provides services to various investors and other borrowers.

The main characteristics of a securities market can be summarised as follows:

  1. The stock exchange acts as a securities market where representatives of business, governmental, non-governmental or parastatal organizations meet to buy and sell these securities.
  2. It also acts as a secondary market where used and existing securities, stocks and bonds are traded.
  3. The stock exchange acts as a securities regulator. It strives for free and fair trade.
  4. To offer investors and companies a safe haven, the stock exchange only trades official, listed securities. Unlisted securities are not admitted to trading on a stock exchange, but can be traded over the counter.
  5. Just as only listed securities are admitted, only accredited investors are admitted. Investors may participate in the purchase or sale of securities on the stock exchange only through official or licensed brokers.
  6. It is a recognized indicator of a country’s economic development. It is also the best reflection of industrial growth and business stability.

Now that you understand the basics of the stock market, let’s look at the difference between BSE and NSE.

There are two major stock exchanges in India, namely the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Let’s start with BFB.

Bombay Stock Exchange (BSE)

BSE and NSE - Image - BSE

The Bombay Stock Exchange or BSE is the oldest, established in 1875 on Dalal Street in Bombay (now Mumbai). Earlier it was known as Native Stockbrokers Association, but under the Securities Contracts (Regulation) Act, 1956, it was recognized as the only major stock exchange in India.

These are some of the key features of the Bombay Stock Exchange:

  1. The BSE is the first and oldest stock exchange in Asia to offer such a wide range of services.
  2. In 2018, more than five thousand companies were registered.
  3. The Sensex is the reference index of the Bombay Stock Exchange. Other popular BSE indices include BSE Largecap, BSE Midcap, BSE 500, etc.
  4. As of April 2018, the BSE is the tenth largest stock exchange in the world with a total market capitalization of over $2.29 trillion.

National Stock Exchange (NSE)

bse and nse - image nse

The National Stock Exchange or NSE is the main stock exchange in the country. It was India’s first digital exchange. The NSE was set up in 1992 to limit the BSE’s monopoly in the Indian stock market. The advent of the NFB has created an electronic trading system that has put an end to the practice of a paper-based trading system.

These are some of the key features of the National Stock Exchange:

  1. Established in 1992 to end the monopoly of the BSE, the NSE is one of the largest stock exchanges in India.
  2. More than 1,800 companies are listed on the National Stock Exchange.
  3. The Nifty 50 is the core index of the NSE. Other popular NSE indices include Bank Nifty, Nifty 100, Nifty Small Cap, Nifty industrial indices like Nifty Auto, Nifty Pharma, etc.
  4. As of April 2018, the National Stock Exchange has a market capitalization of over $2.27 trillion, making it the 11th largest exchange in the world.

Difference between BSE and NSE

While both currency markets are very important to India, there are some important differences to consider:

  1. The Bombay Stock Exchange and the National Stock Exchange are the major stock exchanges in India. However, the oldest is the Bombay Stock Exchange, which was established in 1875, while the National Stock Exchange is a more recent exchange, established in 1992.
  2. The National Stock Exchange and the Bombay Stock Exchange were recognized by the Securities and Exchange Board of India (SEBI) in 1993 and 1957 respectively.
  3. The number of companies listed on the National Stock Exchange is about 1,800 and on the Bombay Stock Exchange about 5,000.
  4. The electronic trading system was first introduced at the National Stock Exchange in 1992 and then at the Bombay Stock Exchange in 1995 under the name BOLT, i.e. BSE online trading.
  5. The official index of the National Stock Exchange is the NIFTY 50 and that of the Bombay Stock Exchange is the SENSEX.
  6. The National Stock Exchange index – Nifty 50 – is calculated based on the top 50 stocks listed on the NSE. On the other hand, the Bombay Stock Exchange Index, SENSEX, includes the top 30 stocks of the BSE.
  7. Another important difference between the two is the trading volume of each stock, which is higher on the National Stock Exchange than on the Bombay Stock Exchange.

A quick tip: If you trade or invest in the stock market, you can buy shares on any stock exchange. It doesn’t really matter which exchange you prefer, as most popular major companies are traded on both the NSE and the BSE.

Final thoughts

Apart from the differences, it can be said that both fairs are nationally and globally known. The mechanisms, calculations and trading times on both exchanges are virtually identical.

Moreover, both the stock exchanges are recognized by the Securities and Exchange Board of India (SEBI) as premium stock exchanges. The Bombay Stock Exchange and the National Stock Exchange are very strictly monitored and regulated by the SEBI, which means that both exchanges are subject to the same regulations.

Also read: What is SEBI? And what role does it play in the financial market?

Finally, it may be added that each investor’s decision to participate in securities trading is a matter of personal choice and may therefore vary from one investor to another.

However, the National Stock Exchange is intended for investors who wish to participate in day trading and trading in high-quality derivatives. Compared to its competitor, the Bombay Stock Exchange, it has better software for all risky online transactions. The Bombay Stock Exchange is an ideal platform for investors who are rather conservative in nature and prefer to invest and wait for their investment to grow gradually.

Either way, you can trade or invest in stocks through any of the exchanges, NSE or BSE, and you are unlikely to notice a substantial difference. Depending on your choice and the type of activity, you can decide where to register and participate.

Frequently Asked Questions

Which is better between NSE and BSE?

Currently(2021), with all the securities options available, NSE is better than BSE.

Why is NSE preferred over BSE?

NSE is preferred over BSE because the NSE has a lower spread, and the NSE is a more liquid market.

Can I buy from BSE and sell in NSE?

Yes, you can buy a share in BSE and sell in NSE. Condition is that the share should not be on the ban list, and it should be a liquid stock.

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