NSE vs BSE: Key similarities and differences

A stock exchange is a platform where traders and investors come together to buy and sell securities with the help of a stockbroker or an agent. In India, the two leading stock exchanges are BSE and National Stock Exchange (NSE). Let’s understand both the exchanges individually before comparing them and figuring out which is better, BSE or NSE.

BSE (formerly Bombay Stock Exchange)

BSE, established in 1875, is the first stock exchange not just in India but in Asia. Headquartered at Dalal Street, Mumbai, BSE was formerly named The Native Share & Stock Brokers Association. BSE promotes trading in equities, derivatives, mutual funds, debt instruments, commodity derivates and currencies, etc.

As of August 2022, there were over 5,000 companies listed on BSE. It stands among the largest stock exchanges of the world alongside the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), the Japan Exchange Group, the National Association of Securities Dealer Automated Quotation (NASDAQ) and the Shanghai Stock Exchange (SSE).

In every stock market, several equity indices are the statistical indicator of changes in the price and performance of the specific stock market. BSE introduced its first equity index, Sensex, in 1986. Just like BSE, it is the oldest index in India. Sensex provides a base for tracking the performance of 30 of the largest companies listed on the BSE spread across 10 sectors. Sensex is traded internationally on Eurex and several leading stock exchanges in South Africa, Russia, China and Brazil.

But Sensex is not the only market index of BSE. A few of the other indices of BSE include BSC 500, BSE 200, BSE 100, BSE SMLCAP, BSE MIDCAP, BSE FMCG, BSE Pharma, BSE Metal and BSE Auto.

BSE came out with its own initial public offering (IPO) and got listed on the NSE in 2017.

National Stock Exchange (NSE)

NSE was established in 1992 and became fully operational in 1994. NSE’s business model comprises trading services, exchange listing, indices, financial education offerings, clearing and settlement services, technology solutions, and market data feeds. It also offers currency and commodities derivatives, equity and equity derivatives instruments.

As of August 2022, there were over 2,000 companies listed on NSE. NSE is the leading stock exchange in India and the third-largest in the world on the basis of the number of trades in equity shares.

The benchmark index of NSE is NIFTY. It was introduced in 1996. Similar to Sensex, NIFTY also provides a base for tracking the top 50 companies listed on NSE. Other market indices of NSE include NIFTY500, NIFTYNext50, NIFTYMidcap150, NIFTYMidSmallcap400 and NIFTYSmallcap250.

NSE is also planning to come with its IPO, but the date is yet to be declared.

BSE vs NSE differences

For Investors and Traders, NSE or BSE, which is better?

The selection of a stock exchange primarily depends on the company and stocks listed. Though many stocks are listed on both NSE and BSE, some stocks are listed on only one of the two exchanges. BSE has a larger number of companies listed on it.

But if the selected stock is listed on both the exchanges – which is the case for most popular stocks - the choice of exchange in NSE vs BSE depends on a few other factors. For retail investors buying or selling stocks in small quantities, either of the exchanges can be picked. But if the transaction volumes are big, NSE should be the preferred choice as it is more liquid than BSE. On the other hand, BSE is the recommended exchange for beginners to invest in. And finally, for day traders and seasoned investors, NSE is the way to go.

Conclusion

Before making any kind of investment, investors should know about the stock exchanges, the products offered by them, and the stocks listed on them. The decision to choose an exchange to trade on and decide which among NSE and BSE is best depends on the goals and preferences of the investor. Both NSE and BSE are leading exchanges and provide a wide array of stocks to invest in. The main concern when investing should not be the exchange to trade on but the quality of the stocks to invest in.

FAQs

1. Are there any differences in the share prices on BSE vs NSE?

Yes, there could be a difference in the prices of the same stock on the two exchanges. The difference, called arbitrage, depends on the liquidity of the stocks. A liquid stock may have an arbitrage as low as ₹0.05. But in the case of an illiquid stock, it can be a little higher.

2. Can I buy a stock in one of the two exchanges and then sell it on the other?

Yes, you can buy a stock on either of the two exchanges, say BSE, and then sell it on the other. It’s called arbitrage trading.