In this article, we are going to discuss the difference between BSE and NSE, the two biggest stock exchanges in India. However, in order to study the Bombay stock exchange (NSE) and the National Stock Exchange (NSE), first, we need to understand what is a stock exchange and its importance. Let’s get started.
What is the Stock Exchange?
According to the Indian Securities Contracts (Regulation) Act of 1956, defines Stock Exchange as, “an association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.“
The stock exchange is a very important component of the capital market for the sale and purchase of financial and industrial securities and bonds. It is a place that is well organized and systematic as it is regulated under strict conditions and rules. The stock exchange performs various functions and offers services to a wide range of investors and other borrowers.
The main features of any stock exchange market can be summed up as follows:
- The stock market serves as a market for securities where bodies from the corporate sector, governmental, non-governmental or semi-governmental come together to sell and buy these securities.
- It also serves as a secondary market where old and existing second-hand securities, shares and bonds are dealt with.
- Stock exchange functions as the regulator of securities. It tries to ensure free and fair trading.
- In order to serve as a safe haven for investors and companies, the Stock Exchange involves in trading of only official and listed securities. The securities which are not listed called the unlisted securities are not allowed to be traded on the exchange but may trade through Over the trade (OTC) counters.
- The way only listed securities are allowed, in the same manner, only the authorized investors are allowed. Investors can only participate in buying or selling the securities at the Stock Market through official or authorized brokers only.
- It works as a recognized indicator of the development of the economy of the country. It is also the best reflector of industrial growth and corporate stability.
Now that you understand the basics of stock exchanges, let’s discuss the difference between BSE and NSE.
In India, there are two main stock exchange markets, namely the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Let’s start with BSE.
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Bombay Stock Exchange (BSE)
The Bombay Stock Exchange or BSE is the oldest which was established in 1875 in Dalal Street of Bombay (now Mumbai). It was earlier known as ‘the native share and stockbrokers association but got recognized as the only important stock market of India under the Securities Contract Regulation Act of 1956.
Here are some of the key features of the Bombay Stock Exchange:
- The BSE is the first and oldest stock exchange market of Asia which offered such a huge variety of services.
- It has over five thousand companies listed as of the year 2018.
- “Sensex” is the benchmark index of the Bombay Stock Exchange. Other popular indexes of BSE are BSE largecap, BSE midcap, BSE 500, etc.
- As of April 2018, BSE is the world’s 10th largest stock exchange with an overall market capitalization of more than $2.29 trillion dollars.
National Stock Exchange (NSE)
The National Stock Exchange or NSE is the country’s leading stock exchange marketplace. It was India’s first digitalized stock exchange in the country. NSE was established in the year 1992 to decrease the monopoly of BSE in the Indian stock market. With NSE’s coming into existence, it brought about an electronic exchange system that did away with the practice of the paper-based exchange system.
Here are some of the Key features of National Stock Exchange:
- NSE was established in 1992 to end the monopoly of BSE and one of the biggest stock exchanges in India.
- Over 1,800 companies are publically traded on the National Stock Exchange.
- “Nifty 50″ is the benchmark index of NSE. Other popular indexes of NSE are Bank Nifty, Nifty 100, Nifty Small cap, Nifty sectoral indexes like Nifty Auto, Nifty Pharma, etc.
- As of April 2018, National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making it the world’s 11th-largest stock exchange.
Also read: 10 Largest Stock Exchanges in the World
The Difference between BSE and NSE
Although both of the stock exchange markets are very important in India, there are some ground differences which we need to take into account:
- Both the Bombay Stock Exchange and the National Stock Exchange are the leading exchange marketplaces in India. However, the oldest one is the Bombay Stock Exchange established in 1875 and the National Stock Exchange is a younger exchange established in 1992.
- Both the National Stock Exchange and the Bombay Stock Exchange were recognized by the Securities and Exchange Board of India (SEBI) in the year 1993 and 1957 respectively.
- The number of listed companies on the National Stock Exchange is around 1,800 and around 5,000 for the Bombay Stock Exchange.
- The electronic system of exchange was first introduced under the National Stock Exchange in the year 1992 and later in the Bombay Stock Exchange in 1995 under BOLT i.e. BSE On-Line Trading.
- The official index used by the National Stock Exchange is the NIFTY 50 while for the Bombay Stock Exchange, it is the SENSEX.
- The National Stock Exchange’s index — Nifty 50, computes the top fifty stocks listed on the NSE. And on the other, the Bombay Stock Index, SENSEX accounts for the top thirty stocks on BSE.
- Another major difference between the two relates to the volume of trading of individual stocks which is higher in the National Stock Exchange than in the Bombay Stock Exchange.
Quick Note: While trading or investing in the Share market, you can buy stocks from either of the stock exchanges. It does not matter much about which stock exchange you prefer as most of the big and popular companies are traded on both NSE and BSE.
Apart from the differences, we can say that both the stock exchange markets are nationally and globally well renowned. The trading mechanisms, settlements and trading hours of both the stock exchange marketplace are almost similar.
On top of it, both of them are designated as the premium stock exchange markets recognized by the Securities and Exchange Board of India (SEBI). The Bombay Stock Exchange and the National Stock Exchange are under very tight control and regulation by the SEBI implying that both are under the same provisions.
By way of conclusion, we can add that the choice of any investor to participate in the trading of security is subjected to personal choice and therefore, can be different from one investor to another.
However, it is said that the National Stock Exchange is for those investors who want to involve in high volume day trade and derivatives trading. It has better software as compared to its rival, the Bombay Stock Exchange for any high-risk transactions made online. The Bombay Stock Exchange is an ideal marketplace for those investors who are a little conservative in nature who choose to invest and wait for their investments to grow gradually.
Anyways, you can trade or invest in equities through any of the stock exchanges, NSE or BSE, and may not find a noticeable difference. According to your choice and activity, you may decide on where to sign up and participate.