Difference between NSE and BSE
The stock market is composed of various entities like the regulators, the stock exchanges, the depositories, and the stockbrokers. Each is integral to ensuring that the securities transaction gets carried out fairly and an investor’s securities stay safe. The National Stock Exchange (NSE) and The Bombay Stock Exchange (BSE) are India’s major stock exchanges. The New York Stock Exchange and NASDAQ are the major stock exchanges in the United States. Similarly, different countries have their stock exchanges.
A company goes public by issuing its shares to retail investors through an IPO or an Initial Public Offering. After that, the exchanges facilitate further trading activities. Hence a stock exchange is similar to a marketplace where buyers connect with sellers to transact securities. When companies list on at least one exchange, they can get traded publicly.
Every publicly-traded company in India is either listed on the NSE or the BSE. Initially, one had to physically go to these exchanges to buy and sell share certificates. However, today one can trade or invest shares digitally using their smartphones.
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What is BSE?
The Bombay Stock Exchange, or BSE, was formerly called ‘The Native Share & Stock Brokers Association.’ The Exchange, founded in 1875, on Dalal Street, in Mumbai, is the oldest stock exchange in Asia. It is the 9th largest stock exchange globally, with more than a trillion-dollar market capitalization. Two hundred sixty-four lakh crores as of Jan 2022. The Sensex, introduced in 1986, is the first equity index in the country. It is the benchmark index of the BSE that comprises the top 30 companies listed on Sensex.
Apart from the Sensex, the BSE also has other indices like the BSE 100, BSE MIDCAP, BSE SMALLCAP, etc. BSE Online Trading (BOLT) came into existence in 1995 to enable online trading on the exchange. The product offering of BSE includes equity shares and derivatives, corporate bonds, commodities and currency derivatives, Mutual Funds, and ETFs. The Bombay Stock Exchange also offers depository services.
In addition, by providing a venue for capital raising, the BSE has played an essential role in developing and strengthening Indian financial markets.
BSE SME is a BSE variation that acts as a trading platform for over 250 small and medium-sized firms. Its BSE StAR MF provides mutual funds services. It is also India’s largest mutual fund portal. BSE Bond is an open electronic book platform for the private placement of debt securities. It also includes India INX, India’s first foreign exchange.
What is NSE?
Founded in 1992, the National Stock Exchange, or NSE, also located in Mumbai, is the leading stock exchange in India. Before incorporating the National Stock Exchange, one had to go to the exchange to trade shares physically. It was the NSE that introduced the dematerialization of securities in India. The NSE is the 10th largest stock exchange with a market capitalization. 254 lakh crore. The Nifty 50 came into existence in 1996 as the main index of the NSE. The NSE also has other banks, Nifty, Nifty Midcap, and Nifty Smallcap.
The National Stock Exchange (NSE) divides its goods into three asset groups for trading purposes: stocks, derivatives, and fixed-income securities. The following items are included in the equity category: Mutual funds, equities, exchange-traded funds (ETFs), closed-ended mutual funds, and Indian Depository Receipts (IDRs). Contracts for shares, currencies, commodities, and interest rates are examples of derivatives. Sovereign gold bonds, corporate bonds, tri-party repo, and other debt instruments are examples of fixed-income securities. The NSE lets investors invest or trade in equity shares and derivatives, corporate bonds, commodities and currency derivatives, mutual funds, and ETFs. The NSE also offers investors depository services to store their securities.
Difference Between NSE and BSE
Both exchanges came into existence to act as respective marketplaces. However, an investor investing for the first time is likely to wonder if there is any difference between the NSE and BSE trading shares. The apparent NSE vs. BSE difference they will spot is that the LTP or Latest Traded Price of the same company will be slightly different on both exchanges. The National Stock Exchange and the Bombay Stock Exchange are India’s leading stock exchanges. The oldest, however, is BSE, while the youngest is NSE. While the Bombay Stock Exchange is ranked 10th among the leading stock exchanges, the National Stock Exchange is ranked 11th.
Does this mean there is a difference between the NSE and BSE shares of the same company? The answer is no; there is no difference in the share. The latest order placed on one exchange is slightly different from that on the other. It happens because there are more orders for the company’s shares on one exchange. One can still buy shares on one exchange and sell them on the other exchange.
- The first one is their respective benchmark indices. The Nifty 50, the NSA’s benchmark index, comprises the top 50 stocks in the Indian Stock Market. Whereas the BSE’s benchmark index, the Sensex, is composed of the 30 leading stocks in the country.
- The NSE has 1920 companies listed according to the website’s 2021 December 21st report. And as of Jan 2022, according to the BSE website, there are 5245 listed companies on the BSE. The BSE has more companies than the NSE since the criterion a company needs to fulfill to list itself on the NSE is higher than BSE. It makes it easier for small companies to list on the BSE than on the NSE.
- However, the volume of trades on the NSE is generally higher than that of the BSE. It simply means that more buyers and sellers are trading via the NSE than the BSE. It results in the NSE having higher liquidity. The higher the liquidity, the higher the chances of an asset being bought or sold.
How Does the Stock Market Work?
When one places a buy order for shares of a company on their smartphones through their stockbroker, the buy order goes to the exchange. The exchange then matches this buy order to the appropriate sell order that has also come to the exchange and executes the order. The buyer receives the shares they bid for, and the seller receives funds for those shares. In India, one can place a buy or sell order on either of the exchanges, provided the company is listed. The exchanges demand a marginal fee for every transaction made. This fee called the transaction fee, is charged when making the transaction.
There are a few critical differences between NSE and BSE, but to understand these NSE vs. BSE differences, one needs to understand the structure of each exchange.
Conclusion
The discussion on “What is the difference between nse and bse?,” enables us to infer that the reason behind traders preferring NSE, a high trading volume results in higher liquidity. Since the criterion to list on the NSE is higher than that of the BSE, fewer low-quality stocks exist. However, one could argue that one is more likely to find a promising emerging on the BSE, which is still not listed on the NSE. However, almost every established public company’s stock trades on the NSE and the BSE. Both the National Stock Exchange and the Bombay Stock Exchange play an essential role in the Indian capital market. Hundreds of thousands of brokers and investors trade on these stock markets every day. Both are based in Mumbai, Maharashtra and are registered with the SEBI (Securities and Exchange Board of India).
Frequently Asked Questions (FAQs)
Active traders prefer trading on the NSE since it has more volume and liquidity, resulting in more successful orders. However, one should note that the BSE has many more listed companies, although investing in those companies would be very risky.
No, Reliance shares are Reliance shares. The exchange through which a share trades does not change the shares’ fundamental value.
Once the company meets the NSE listing requirements, it can apply for an NSE listing. However, to know if the company intends to list itself on NSE, you will have to track the company closely.
Yes, it is possible to buy stocks on the Bombay Stock Exchange (BSE) and sell them on the National Stock Exchange (NSE) or vice versa.
As of my knowledge cutoff in September 2021, the National Stock Exchange (NSE) is larger and more actively traded compared to the Bombay Stock Exchange (BSE). However, it is always recommended to verify the latest data as market conditions may change over time.