Last Updated on Dec 16, 2024 by Vanessa Sequeira
Let’s explore the basics of two major stock exchanges in India: the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The NSE, founded in 1992, is the country’s biggest stock market using electronic trading and the Nifty 50 index. On the other hand, the BSE, dating back to 1875, is the oldest exchange, known for introducing the S&P BSE Sensex in 1986. Both exchanges have similarities but also differ in areas like fees and market size. In this beginner-friendly guide, we’ll break down the distinctions between NSE vs BSE to help you understand how they work.
Table of Contents
What is NSE and BSE in the Stock Market?
NSE and BSE are big marketplaces where people trade stocks in India. Both NSE and BSE make it easy for people to buy and sell stocks, helping the stock market work smoothly. People who invest or trade use NSE and BSE a lot, and these exchanges are important for how money moves in India’s financial world.
Understanding the distinctions and similarities between these stock exchanges is crucial for investors and traders alike. So, let’s start by understanding what NSE and BSE are in the share market and then dig into the distinctions between BSE and NSE.
What is the National Stock Exchange (NSE)?
The National Stock Exchange, founded in 1992, is one of India’s leading stock exchanges, renowned for its innovation and digital-first approach to trading. As a modern and technology-driven platform, the NSE revolutionised the Indian stock market by introducing electronic trading systems, which replaced the traditional open outcry method. This transition enhanced transparency, efficiency, and accessibility for investors across the country.
The full form of NSE is National Stock Exchange, with its flagship index, the Nifty 50, tracking the performance of the top 50 companies listed on the exchange. NSE is a preferred choice for many beginners due to its:
- Efficient technology: NSE offers a robust and user-friendly trading platform for seamless transactions.
- Liquidity: As one of the most traded exchanges, NSE ensures quick order execution with minimal price fluctuations.
- Education and awareness: NSE promotes financial literacy through its initiatives like NCFM (NSE’s Certification in Financial Markets), which helps beginners understand stock market concepts.
What is the Bombay Stock Exchange (BSE)?
The Bombay Stock Exchange, established in 1875, holds the distinction of being the oldest stock exchange in Asia. Its legacy and credibility make it a cornerstone of India’s financial ecosystem. Located in Mumbai, BSE has played a pivotal role in shaping the Indian capital markets and remains a trusted exchange for investors worldwide.
BSE’s benchmark index, the S&P BSE Sensex, comprises 30 blue-chip companies from key sectors of the economy, serving as a barometer for the market’s overall health. The BSE share market includes more than 5,000 listed companies, making it one of the largest exchanges globally in terms of listings.
Key features of BSE for beginners:
- Wide range of investment options: BSE provides access to equities, mutual funds, debt instruments, and more.
- Affordable trading: With low fees and smaller lot sizes, BSE is beginner-friendly for investors with limited capital.
- Reliable infrastructure: BSE’s long-standing reputation assures stability and trust for new investors.
Similarities Between NSE and BSE
While comparing NSE vs BSE difference, it’s important to note the shared attributes that make both exchanges integral to India’s financial markets:
- Digitised Trading Platforms: NSE and BSE have completely electronic trading systems, enabling secure and efficient transactions for all investors.
- Diverse Financial Products: Besides equity, you can trade in bonds, mutual funds and ETFs, commodities, derivatives, futures and options, and currencies on these exchanges.
- Settlement Cycle: Both follow a T+1 or T+2 settlement process, which guarantees prompt and smooth settlement of trades.
- Regulation by SEBI: BSE and NSE are regulated by the Securities and Exchange Board of India (SEBI).
- Benchmark Indices: The Sensex (BSE) and Nifty 50 (NSE) serve as key indicators of the stock market’s performance and are popular among domestic and global investors.
- Market Hours: The trading hours for both NSE and BSE are identical, running from 9:15 AM to 3:30 PM IST on business days, ensuring consistency in trading opportunities.
What is the Difference Between NSE and BSE?
While the points mentioned above capture some similarities between NSE and BSE, these exchanges also exhibit notable differences. Let’s look at the difference between NSE and BSE.
| Points of difference | NSE | BSE |
| Full form | National Stock Exchange | Bombay Stock Exchange |
| Formed in | 1992 | 1875 |
| Benchmark index | Nifty 50 | S&P BSE Sensex |
| Companies in the index | 50 | 30 |
| Companies listed on the exchange | 5,000+ | Around 2,000 |
| Transaction charges | The transaction charges are 0.00335% on turnover (buy & sell) for equity delivery and intraday trades, 0.00195% on turnover for futures, and 0.053% on premium value for options. | The transaction charges are 0.00375% for the turnover value of buy and 0.00275% for the turnover value of buy and sell. |
| Ranking in the world | NSE ranks 8th among the largest stock exchanges in the world. | BSE ranks 10th among the largest stock exchanges in the world. |
| Use of the electronic trading platform | NSE started the electronic trading platform right from its inception in 1992. | BSE incorporated the electronic trading platform called BOLT (BSE On-Line Trading) in 1995. |
| Trading volume | Very high | Lower than NSE |
| Online trading system | Introduced in 1995 | Introduced in 1992 |
| Products traded on the platform | Equity stocks Equity derivatives Currency derivatives Commodity derivatives Mutual funds Exchange-Traded Funds Security Lending & Borrowing Scheme Institutional Placement Program Offer for Sale Corporate Bonds | Equity stocks Equity derivatives Currency derivatives Commodity derivatives Mutual funds Exchange-Traded Funds Offer for Sale Corporate Bonds |
| Liquidity | NSE has higher liquidity as they trade more volume compared to BSE. | BSE offers comparably low liquidity. |
| Market capitalisation | ~ Rs. 334.7 lakh cr. | ~ Rs. 36,422,360.83 cr. |
| Network | The network of NSE is over 1,500 cities. | The network of BSE is 450 cities. |
| Official website address | www.nseindia.com | www.bseindia.com |
How Has NSE Become More Popular Than BSE?
Now that you know the NSE BSE difference, you should know how the NSE beat the BSE to become the leading stock exchange in India due to several reasons listed below:
- Technology: NSE’s advanced and reliable technology infrastructure enabled faster and more efficient trading than BSE.
- Products: NSE offered a more comprehensive range of financial products, including derivatives, which attracted more investors and traders.
- Transparency: NSE strongly focused on transparency and disclosure, which instilled investor confidence and helped prevent fraudulent activities.
- Liquidity: NSE was known for higher liquidity levels, which meant more trading activity and higher trading volumes, making it easier for investors to buy and sell securities.
- Efficiency: NSE introduced several measures to increase efficiency, such as market-wide circuit breakers, which helped stabilise the market during times of volatility.
- Regulatory environment: The Securities and Exchange Board of India (SEBI) introduced several measures favouring NSE, such as allowing it to launch new products without prior approval, which helped NSE grow faster than BSE.
Overall, the combination of technology, product range, transparency, liquidity, efficiency, and regulatory environment made NSE the preferred stock exchange in India, increasing its popularity over BSE.
NSE vs BSE: Which is Better for Beginners?
Both NSE and BSE offer trading opportunities in different types of securities. NSE, however, boasts of a large trading volume making it easier for the price discovery mechanism to work effectively. This volume outweighs the limitation of the index containing only a few stocks and can allow better trading opportunities. However, some stocks are listed on the BSE only, so if you wish to invest in such stocks, you would have to trade on the BSE.
You can compare the stocks across both these platforms and then choose one as per your requirements. Alternatively, you can opt for arbitrage trading and buy stock from NSE and sell it in BSE. Moreover, there would be a difference in the price of the same stock on NSE and BSE platforms depending on the stock’s liquidity.
To Wrap Up
Go through the NSE and BSE difference before you choose either platform. Understand how these platforms work and then trade in them. Both these exchanges experience market volatility, and so a healthy risk appetite is recommended if you wish to trade in them.
FAQs about NSE and BSE
What is NSE and BSE in the stock market?
The NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are the two leading stock exchanges in India where securities like stocks and derivatives are traded.
NSE vs BSE, which is better?
The discussion of which is better, NSE or BSE has no end. Hence, build a financial plan, look for stocks that to invest in according to the plan and budget, and choose whichever platform suits your needs and requirements the best. Alternatively, you can consult a financial advisor before you make any investment decision.
Can I buy in BSE and sell in NSE?
The simple answer to this question is yes. Shares can be bought on one exchange and sold on another only from the next day, i.e., on T+1. For trading purposes, you can buy on NSE and sell on BSE via intraday and deliver shares. It is called arbitrage trading.
What is the full form of NSE and BSE?
The NSE and BSE full form is:
NSE – National Stock Exchange
BSE – Bombay Stock Exchange
Why is the share price different in BSE and NSE?
NSE and BSE are separate entities with different trading platforms. The demand and supply of a stock on each exchange can vary due to several factors, such as liquidity, investor preferences, and trading volumes.
The price of a stock is determined by the demand and supply of the stock on each exchange. In an efficient market, the price of a stock on one exchange should be similar to that on the other exchange. However, the price discovery mechanism may only sometimes function efficiently, leading to price differences.
These price differences create arbitrage opportunities for traders and investors who can buy shares on one exchange and sell them on the other to make a profit, leading to price convergence. Overall, the price differences in the shares of the same company on NSE and BSE can be attributed to various factors. Still, arbitrage opportunities usually help in reducing the differences over time.
Can a company be listed in both BSE and NSE?
Yes, a company can be listed on both BSE and NSE. In fact, most blue companies in India are listed on both BSE and NSE.
How does a company get listed on BSE or NSE?
Companies get listed on BSE or NSE by issuing shares via Initial Public Offering (IPOs) on the respective platforms.
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
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