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What Is NSE And BSE? The Best Guide For Beginners

What Is NSE And BSE
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What is NSE and BSE?  There are two major stock exchanges in India with massive trading volumes. One is the National Stock Exchange (NSE), and the other is the Bombay Stock Exchange (BSE). If you are investing in the stock market or willing to invest in, you have heard both the terms and now you want to know more about them. 

NSE and BSE are the largest stock exchanges in Asia after China and Japan. In this article, we will address all the key differences between NSE and BSE. Here is all the information you need to know about both stock exchanges. 

National stock exchange building

What is NSE?

The NSE (National Stock Exchange) is the biggest stock exchange in India in terms of market capitalization. It is the fourth largest stock exchange in the world. The NSE was established in 1992 in Mumbai and became the leading stock exchange in India. There are over 1600 companies listed on NSE.

The NSE was the first stock exchange to bring an electronic and automated trading system from a paper-based share trading system that involved physical share certificates. The leading exchange has the benchmark index called NIFTY (National Fifty). NIFTY is a weighted average of the top 50 companies listed on the exchange. 

 

Bombay stock exchange building

What is BSE?

Established in 1875, the BSE (Bombay Stock Exchange) is the oldest stock exchange in Asia. This stock exchange has the legacy of high-speed trading in the Indian securities market. BSE consists of over 5000 companies listed on it. The stock exchange was formerly known as the Native Share & Stock Brokers Association.

The BSE has its own benchmark index called SENSEX. The stock market index SENSEX was introduced in 1986. The benchmark index involves the top 30 companies listed on the stock exchange. 

How does NSE and BSE work?

What is BSE and NSE in the stock market? Both the NSE and the BSE use a similar trading system and same process in the securities markets. They operate under the regulatory body Securities and Exchange Board (SEBI). Investors and traders use their brokers to connect to the exchanges, where they place to buy or sell orders.

What influences their choice of trading tactics? You may have heard the terms “Nifty” and “Sensex” frequently. They are both indices, with the former representing the NSE and the latter the BSE. These indices are essential to how these exchanges operate.

  • Given their size, the indices also serve as a gauge for the state of the Indian economy as well as the health of the firms listed on these exchanges. Based on their company’s standing, market value, and relevance, a set of 50 NSE stocks and 30 BSE companies have been chosen to comprise a weighted formula that provides us with the “worth” of the index.
  • The value of the Nifty & Sensex increases if the price of any of these stocks rises. Nifty & Sensex decreased along with price changes.

Here is the difference between both the exchanges in terms of their role

  • If a business wants to raise capital from investors, it must first register with the stock exchange, which it accomplishes through an IPO.
  • The business creates shares and sells them for a specific price. The shareholders of the corporation are the buyers of the shares.
  • Investors receive a set dividend or profit to use the layman’s term for each share. The dividend grows as the business expands, and vice versa. If the business expands, it will draw in more investors, necessitating the issuance of further shares.

The stock exchange, such as NSE and BSE, regulates all of these transactions. Investors purchase the shares that companies list on these markets. Other than BSE and NSE, there are also other stock exchanges in India like Metropolitan Stock Exchange and India International Exchange. But there are few companies that are listed on such exchanges. Only NSE and BSE are the leading stock exchanges in the country.

Difference between NSE and BSE with their detailed comparisons

Now you know more about both stock exchanges. Let’s learn what the differences are between them. 

  • The BSE has been in operation since the 18th century, making it the oldest stock exchange in Asia. On the other hand, India’s biggest stock exchange, NSE, was relatively recently discovered—less than three decades ago. The BSE is ranked 10th in the global stock exchange rankings, while the NSE is ranked 11th.
  • The National Stock Exchange has an advantage over the Bombay Stock Exchange when it comes to electronic trading in the stock markets. The NSE has always been a completely electronic stock exchange that supports a paperless trading system, dating back to the time of its inception.
  • BSE, on the other hand, had long used a paper-based system and didn’t move to electronic trading until 1995, when BSE Online Trading was introduced (BOLT).
  • NSE has a significant competitive advantage and has essentially monopolized the futures contracts market. The NIFTY 50 and Bank NIFTY, two of the key indices of the National Stock Exchange, are among the most liquid and actively traded contracts in India’s derivative market. The BSE, in contrast, sees far lower volumes from both dealers and investors.
  • The Bombay Stock Exchange is unquestionably further ahead than the National Stock Exchange when comparing the number of listed companies in the NSE and BSE. In comparison to the BSE, which has more than 5000 companies, the NSE has more than 1600 companies registered on its stock exchange. Although the gap between the two stock exchanges in this regard is astounding, it is completely understandable given that the BSE has existed for a far longer period of time than the NSE.
  • The BSE is the only listed exchange in India when comparing NSE and BSE listings. The National Stock Market, a competitor stock exchange platform, lists the BSE. Although NSE also had aspirations to float on a stock market, those plans sadly never materialized due to numerous legal obstacles.
Remark  NSE BSE
Established in 1992 1875
Companies listed  1600+ 5000+
Market capitalization $3.4 Trillion $3.48 Trillion
Benchmark Index NIFTY 50 SENSEX
Global ranking  11th  10th

Why a company is listed on NSE or BSE?

Companies should list themselves on exchanges since doing so increases their chances of receiving investments and makes them more well-known among those involved in the trading industry. There aren’t many more specific justifications for businesses to list on exchanges.

  • Investors are more at ease trading stocks when all transactions occur on a single, trustworthy platform since they know they are secure. Businesses are also aware that transparency is a clear benefit of actions taken in a digital environment where transactions can be tracked.
  • This also makes it simpler for investors to engage in trading because they are aware that businesses must adhere to listing agreements and give all required information on exchanges.
  • Since promptness is usually a deciding factor in trade, online trading transcends both NSE and BSE distinctions. Prices are erratic; therefore, companies that list on exchanges provide investors a higher chance of finding a price that they find appealing.
  • The digital sphere expands the reach of every business that wants to make its equities available to investors, just like anything else. Any internet-enabled device can access online trading systems, making the corporation and its stocks available to a far wider range of investors.

Should we trade on BSE or NSE?

The NSE has more volume in the markets despite BSE shares being more numerous. There will be more price analysis thanks to the expanding NSE market. Before buying a stock, evaluate both market prices and make an informed choice. Stock prices differ between the NSE and BSE. In addition, you need to be informed that the stock can only be purchased on the BSE.

Depending on the company you wish to invest in or trade in, you can choose between the NSE and the BSE. One exchange may be the only place where certain stocks are listed. As a result, you would have to trust the exchange where the stock is listed.

You might base your choice for stocks that are listed on both exchanges on trading activity and the total number of shares listed on each exchange. Once the shares are allocated to your Demat account, you can purchase them on one exchange and sell them on another.

Trading on an exchange with a higher trading volume is preferable. This is because you may easily identify trades and turn your investments into cash due to the larger trading volumes.

Bottom Line

A stock exchange is a regulated marketplace where investors can purchase and sell shares of various corporations. What is BSE and NSE? The National Stock Exchange and Bombay Stock Exchange are India’s two main stock exchanges.

Both the NSE and the BSE offer a reliable online trading platform and serve as a gauge of the state of the Indian economy.

FAQs

What is the difference between BSE and NSE? 

BSE is the Bombay stock exchange which has a benchmark index called SENSEX and there are more than 5000 companies are listed on it. On the other hand, NSE is the National stock exchange which has a benchmark index called NIFTY 50 and there are more than 1600 companies are listed in it.

What is the main function of BSE and NSE? 

The main function of both BSE and NSE is to allow investors to invest smoothly in the stocks of listed companies in both stock exchanges. Both are the key drivers of the Indian economy. 

What is NSE and BSE in share market? 

NSE and BSE are two stock exchanges in the share market. They hold their positions as major players in the Indian economy.

What is the difference between NSE and BSE stocks?

The key difference between both NSE and BSE stocks is that top NSE stocks come under the NIFTY and top BSE stocks under SENSEX. 

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