When it comes to the equity share market in India, there are two main stock exchanges that enjoy the bulk of the trading volume. One is the Bombay Stock Exchange, abbreviated as BSE, while the other is the National Stock Exchange, also known as NSE. These are two of the biggest stock exchanges in India and are among the largest in all of Asia, next only to Japan, China, and Hongkong.
Whether you are an investor or a trader, it is essential to understand what these stock exchanges are and learn the key difference between BSE & NSE. Here’s some valuable information on these two stock exchanges that can help you understand and better appreciate the difference between NSE and BSE.
What is NSE?
Founded in the year 1992, the National Stock Exchange (NSE) is India’s biggest stock exchange in terms of market capitalization. The NSE was the first ever stock exchange to have brought in the system of electronic and fully automated trading to India. In just a few years, this electronic system of trading has completely replaced the paper-based share trading system involving physical share certificates.
The stock exchange also has a benchmark index known as NIFTY (National Fifty). known as SENSEX The NIFTY index derives its value from 50 of the biggest (in terms of market capitalization) and most frequently traded companies listed in the NSE. Furthermore, NSE has been very recently adjudged as the world’s largest exchange in the derivatives segment in terms of the number of contracts traded.
The Bombay Stock Exchange (BSE) is the older counterpart to the National Stock Exchange. The BSE started its operations in the year 1875 under the name of “The Native Share & Stock Brokers Association.” This makes the BSE the oldest stock exchange in all of Asia. Unlike the NSE, the Bombay Stock Exchange shifted from the open-cry system to fully electronic trading (BOLT) only in 1995.
Similar to NIFTY, the Bombay Stock Exchange also has its own benchmark index known as SENSEX (Sensitive Index). This index was first introduced in the year 1986 and is essentially a weighted average value of the top 30 companies listed in the stock exchange.
Difference between NSE and BSE
Now that you know more about these two stock exchanges, here’s some more information that clearly highlights the difference between BSE & NSE.
Incorporation
BSE is the oldest stock exchange in Asia and has been in existence since the 18th century. In contrast, NSE came into the picture relatively very late, less than 30 years ago. In the global stock exchange rankings, BSE stands at the 10th position, while the NSE occupies the 11th position.
Electronic trading
When it comes to NSE vs BSE, the National Stock Exchange has the upper hand with respect to electronic trading. Right from the time of its incorporation, the NSE has always been a fully electronic stock exchange promoting a paperless trading system. BSE, on the other hand, had been following the paper-based system for a long time, and made the switch to electronic trading only in the year 1995 with the introduction of BSE On-Line Trading (BOLT).
Derivatives contracts
In the derivatives contracts segment, NSE has a huge head start and has virtually monopolized the entire segment. Two of the National Stock Exchange’s major indices – the NIFTY 50 and Bank NIFTY – are exceptionally liquid and come in as the most highly traded contracts in the derivative segment in India. In comparison, the BSE enjoys far lower volumes among investors and traders alike.
Number of listed companies
Comparing the number of listed companies in NSE vs BSE, it is evident that the Bombay Stock Exchange is undoubtedly further ahead than the National Stock Exchange. The NSE has more than 1600 companies listed in the stock exchange, while the BSE features more than 5000 companies in its exchange. While the difference between the two stock exchanges is staggering in this regard, it is quite understandable, since the BSE has been in existence for far longer than the NSE.
Listing of stock exchange
With respect to listing of NSE vs BSE, the Bombay Stock Exchange is the only listed exchange in India. The BSE is listed on its rival stock exchange platform, the National Stock Exchange. While NSE also had plans of getting listed on a stock exchange, it unfortunately never came to pass due to several legal hurdles.
Conclusion
Both the BSE and the NSE are among the most successful stock exchanges in the world. The Bombay Stock Exchange, with its 5000+ portfolio of listed companies, is the ideal platform for beginners. Alternatively, the National Stock Exchange, with its excellent repertoire of derivative contracts, is the perfect platform for seasoned investors and traders. Now that you know the main difference between NSE and BSE, you could go right ahead and start investing in the stock exchange of your choice.
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