Beginner's Guide: NSE or BSE: Which Is Better?

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  • 15 Aug 2023

Stock exchanges facilitate trading in listed shares and securities such as bonds and commodities. They enable companies to list their stock publicly, generating extra capital for their operations. Additionally, stock exchanges provide investors with a platform to trade, enabling wealth creation. In India, the prominent stock exchanges are the NSE and BSE.

NSE, founded in 1992, stands as India's preeminent stock exchange, boasting the highest market capitalization among its counterparts. This financial powerhouse revolutionized the trading landscape by pioneering electronic stock trading, a groundbreaking advancement that streamlined and modernized how stocks are bought and sold. With its headquarters strategically situated in the bustling financial hub of Mumbai, the NSE operates at the heart of India's economic activity.

Its benchmark index, the Nifty 50, is central to the NSE's operation. This index is a meticulously curated collection of the fifty most influential and impactful stocks drawn from diverse sectors within the share market. The Nifty 50 serves as a barometer of the overall health of India's stock market, offering investors and analysts valuable insights into the fluctuations and trends that shape the financial landscape.

The BSE has etched an illustrious legacy as India's oldest and most venerable stock exchange. With a history spanning over a century and a half, the BSE has played a pivotal role in shaping India's financial landscape trajectory.

Beyond its national prominence, the BSE has garnered global acclaim as Asia's trailblazing stock exchange, serving as a beacon of innovation and progress in financial markets. Its unwavering commitment to transparency, integrity, and technological advancement has propelled it onto the international stage, positioning it among the ranks of the world's premier stock exchanges.

In 1986, BSE launched the S&P BSE Sensex, comprising stocks from the upper echelon of the Bombay Stock Exchange's listings – the top 30 companies.

Before definitively determining whether NSE or BSE holds the upper hand, a comprehensive grasp of the disparities across multiple dimensions is imperative. Delving into the intricacies of these two eminent stock exchanges is crucial for making an informed decision. The ensuing table meticulously elucidates the distinctions between NSE and BSE, shedding light on the various facets that set them apart:

Total number of companies listed

2000+

5000+

Trading volume

Very high

Less than NSE

Liquidity

More compared to BSE due to high trading volume

Comparatively lower than NSE

Number of stocks

Fewer than BSE

A gigantic list of stocks are available on the BSE

Parameter NSE BSE
Total number of companies listed2000+5000+
Trading volumeVery highLess than NSE
LiquidityMore compared to BSE due to high trading volumeComparatively lower than NSE
Number of stocksFewer than BSEA gigantic list of stocks are available on the BSE

Beginners find BSE more appropriate, while seasoned investors and traders favor NSE. If you're an Indian investor seeking to invest in shares of emerging companies, BSE appears as the ideal option. On the other hand, if you engage in day trading, assuming the risks of share trading with derivatives, futures and options, NSE becomes the preferred selection.

Additionally, NSE offers superior software for high-stakes online transactions. Conservative investors, who prefer to observe their investments mature, discover BSE to be suitable. That said, several factors have propelled the popularity of the NSE over the years. These include:

  • NSE's advanced and reliable technology infrastructure is a cornerstone of its operational prowess, delivering a trading experience that surpasses that of its counterpart, BSE. This technological prowess has empowered NSE to redefine the landscape of financial markets through a seamlessly integrated ecosystem.

  • NSE's extensive array of financial products, encompassing a diverse spectrum of derivatives and investment instruments, has magnetized a significantly larger cohort of seasoned investors and ambitious traders. This expansive suite of offerings has not only bolstered the exchange's reputation as a dynamic financial hub but has also acted as a powerful catalyst in drawing forth a burgeoning influx of market participants.

  • At the core of NSE's operations lies a robust framework that places transparency at the forefront. This commitment is exemplified through comprehensive measures ensuring all relevant information is readily accessible to market participants. NSE has consistently taken proactive steps to ensure that financial statements, corporate reports, and other critical data are promptly and accurately disseminated to the investing public. This open and accessible approach empowers investors to make well-informed decisions, fostering trust and credibility.

  • The augmentation of liquidity levels at the NSE has sparked a notable surge in trading activity, propelling trading volumes to new heights. This symbiotic relationship between liquidity and trading has effectively streamlined securities transactions, culminating in a more seamless and efficient experience for investors.

  • NSE has diligently pursued a series of strategic measures to enhance market efficiency and bolster stability, thereby playing a pivotal role in managing tumultuous market conditions. One of the standout achievements in this regard was the successful implementation of market-wide circuit breakers, a proactive mechanism designed to mitigate the impact of extreme volatility on the financial landscape.

The SEBI implemented measures that favored the NSE, including granting it the authority to introduce new products without prior approval, propelling the NSE's growth ahead of the BSE.

Both NSE and BSE present trading opportunities for various securities. However, NSE stands out with its substantial trading volume, enhancing the effectiveness of the price discovery mechanism. Despite the index's limitation of encompassing only a few stocks, this impressive volume overcomes the constraint and facilitates improved trading possibilities. Nonetheless, some stocks are exclusively listed on the BSE. Therefore, you must trade on the BSE if you intend to invest in these particular stocks.

By comparing stocks on both platforms, you can select the one that aligns better with your preferences. Alternatively, you can engage in arbitrage trading by purchasing stocks from NSE and selling them on the BSE. Furthermore, disparities in stock prices between NSE and BSE platforms will arise based on individual stock liquidity.

Before selecting either platform, analyze the distinctions between BSE and NSE. Grasp the operational mechanisms of these platforms, then engage in trading. Both BSE and NSE encounter market fluctuations, hence, robust risk tolerance is advisable for trading within their realms.

NSE/BSE FAQs

As of March 2023, the NSE boasts a larger market capitalization than the BSE. NSE holds a significant market capitalization of around $3.2 trillion, securing its position as the third-largest global stock exchange. In contrast, the BSE possesses a market capitalization of roughly $2.6 trillion during the same period.

Disparities in stock prices between the NSE and BSE arise due to variations in stock liquidity. This contrast in pricing is particularly pronounced for illiquid stocks, where the price differential can be more significant. The level of stock liquidity stands out as a prominent distinction between the BSE and NSE.

Certainly, it is permissible to purchase shares from one exchange and subsequently sell them on a different exchange once the shares have been securely delivered to your Demat account.

Investors have the convenient option to sell their securities easily using the online trading settlement offered by BSE. This enables them to convert their investments into cash whenever necessary efficiently. Opting for companies listed with BSE can also help investors avoid potential fraudulent entities.

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