BSE vs NSE: What are the Differences Between BSE and NSE?
India has 23 stock exchanges in total. Out of those 23, two stock exchanges, namely the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are the major stock exchanges. While most people are familiar with their existence and what they do, they might not be familiar with what their differences are. However, before we can start talking about the differences between the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), let’s spend a few moments understanding what a stock exchange actually is. A stock exchange, also known as the securities exchange or bourse is a place where traders and stockbrokers can buy/sell securities such as shares, stocks and bonds. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Whether you are a seasoned trader who knows what are the best stocks to buy in India or a beginner who is looking to start investing in securities, the stock market is where all the trading happens. Now that we have covered what a stock exchange is, let’s find out how BSE and NSE are different.
BSE vs NSE: Difference Between BSE and NSE
What is BSE?
The Bombay Stock Exchange (BSE) is the oldest stock exchange in India. The BSE began its operations as “The Native Share & Stock Brokers Association” in the year 1875. This makes the BSE the oldest stock exchange across the continent of Asia as well. Unlike the NSE, the BSE shifted from the open outcry system to completely electronic BSE On Line Trading (BOLT) system only in 1995.
Bombay Stock Exchange has its own benchmark index known as SENSEX (Sensitive Index). This index was first introduced in the year 1986 and is essentially a weighted average value of the top 30 companies listed in the stock exchange.
What is NSE?
The National Stock Exchange (NSE), which also happens to be India’s largest stock exchange in terms of market capitalization, was founded in 1992. The NSE was the first ever stock market to embrace and introduce the system of electronic and fully automated trading in India. NSE’s revolutionary impact brought a sea change into the way share trading was done in India. In just a few years, this electronic system of trading had completely replaced the paper-based share trading system involving physical share certificates.
The stock market also features a benchmark index referred to as NIFTY (National Fifty). The NIFTY index derives its value from 50 of the biggest (in terms of market capitalization) and most frequently traded companies listed in the NSE. Furthermore, NSE has been very recently adjudged as the world’s largest exchange in the derivatives segment in terms of the number of contracts traded.
Difference between NSE and BSE
Now that you have a basic idea of the NSE and BSE, it’s time to discuss the differences between the two. Yes, they are both exchanges, but there are some distinct differences between the two. Let’s find out what they are:
BSE is the oldest stock market in Asia and has been operational since the 19th century. In contrast, NSE came into the picture very recently, less than 30 years ago as a matter of fact. In the global stock market rankings, BSE stands at the 10th position, while the NSE occupies the 11th position.
When it comes to electronic trading, the National Stock Exchange has a distinct upper hand over the Bombay Stock Exchange. Right from the time of its inception, the NSE has always been a totally electronic stock market that promoted a paperless trading system. BSE, on the other hand, had been following the paper-based system for a long time and made the switch to electronic trading only in the year 1995 with the introduction of BSE On-Line Trading (BOLT).
In the derivatives contracts segment, NSE has a huge head start and has virtually monopolized the entire segment. The NIFTY 50 and Bank NIFTY, two of the main indices of the National Stock Exchange are very liquid and are the most highly traded contracts of India’s derivative segment. By way of comparison, the BSE has far lower volumes among investors and traders alike.
Number of listed companies
When it comes to the number of listed companies, the Bombay Stock Exchange is miles ahead of the National Stock Exchange. A lot of that has to do with the fact that the Bombay Stock Exchange has been around for a lot longer than the National Stock Exchange. While the NSE has a strong roster of around 1600 listed companies, the BSE has more than three times the number with around 5000 companies.
Listing of the stock exchange
With respect to the listing of NSE vs BSE, the Bombay Stock Exchange is the only listed exchange in India. The BSE is listed on its rival stock market platform, the National Stock Exchange. While NSE also had plans of getting listed on a stock exchange, it unfortunately never came to pass due to several legal hurdles.
Should you invest in the BSE or the NSE?
Both the exchanges are very good as far as their services offered to investors are concerned. Instead of worrying about which exchange you should invest your money in, you should focus on selecting the right stock for your investment. It doesn’t really matter which exchange you use for investing. Both the NSE and BSE are very good stock exchanges which offer a very solid technology platform for buying and selling stocks.
However, you must remember that the stock prices in both the exchanges can be slightly different from one another. The difference won’t be extreme but a stock trading for Rs. 100 in the NSE might be trading at Rs. 99 in the BSE.
Despite the price difference, the brokerage levied by your broker and the Securities Transaction Tax are the same on both the NSE and BSE. The NSE trade volume of shares is generally high. This makes it a good place to sell if you are planning to sell a large quality of stocks. There are some shares which are not listed on the NSE and you can only trade them on the BSE. Some popular stocks which are exclusively available for trading on the BSE are SpiceJet and Claris Lifesciences.
Almost all share brokers tend to be members of both the NSE and BSE. It’s very easy for you to invest in either of the exchanges. As long as you are not trading at an extremely high volume, it shouldn’t matter which exchange you trade in. When you invest in stocks, be more concerned about the quality of stocks rather than the exchange, BSE or NSE.
Differences between NSE and BSE: Conclusion
The National Stock Exchange (NSE) and the Bombay Stock Exchange (NSE) are two of the biggest stock exchanges in the world. All of the best shares to buy in India are available in those two stock exchanges. The Bombay Stock Exchange, with its 5000+ portfolio of listed companies, is the ideal platform for beginners. The sheer volume of options provides a lot of flexibility. Alternatively, the National Stock Exchange, with its excellent repertoire of derivative contracts, is the perfect platform for seasoned investors and traders. Now that you are aware of most of the differences between NSE and BSE, you can go ahead and start investing.