Difference Between NSE and BSE - What is nse and bse?
As an investor or trader, one must have a complete understanding of the stakeholders in the share market. The major entities are investors/traders, stock brokers, clearing corporation and the exchanges. A broker acts as an intermediary between you and the exchange. Companies that raise money by issuing shares to the public get listed on the exchanges. Through IPO, shares are issued to the investors in the primary market and once IPO gets over, the company gets listed on the exchange that gives an opportunity to trade in shares. For example if you want to buy shares of Infosys or Royal Enfield, you can buy it over the exchange any time as IPOs are conducted only for a period of 3 days. After that period, one can trade in shares only through the secondary market. It is the place where all shares get traded and the stock markets are regulated by SEBI. It is essential for any trader or investor to understand what is nse and bse in share market and the difference between nse vs bse before entering the stock market.
NSE and BSE are the major national exchanges in India. You can trade in stocks by opening a demat or trading account with a depository participant or stockbroker.
Why do companies get listed on exchanges?
1. Transparency and automated trading:
High end technology in terms of trading provides a seamless experience for the investors. The high volume of trading over the exchanges results in lower impact cost for the investor. Automation leads to transparency in dealings thereby increasing investor’s confidence.
2. Huge Reach:
Online trading platforms can be accessed from any part of the country. The company gets greater visibility after its listing on the exchange and the public get equal opportunity to use this platform for investment purpose.
3. High transaction speed:
There was huge delay in trade executions before the invention of online trading system and this has been completely done away with high speed trading platforms. Efficiency of transactions have increased manifold due to the high speed in which they happen over the exchange.
Role of exchanges:
1. Market where securities are traded:
Any investor can buy or sell securities depending on his need. There is no specific time period till which one has to wait so as to trade in shares. Liquidity is high which is not the case with investment avenues like land or gold.
2. Responsible for evaluation of stock prices:
Based on demand and supply, the price of stock either increases or decreases. If the company progresses well, there is increase in demand for its shares and in turn its price increases. Whereas if the company does not perform well, demand for its shares decreases and in turn its price also decreases. Evaluation of the stock’s price happens in the exchange.
3. Safeguards investors:
There is a thorough check and balance in the kinds of companies that get listed on the exchange and hence investors’ money is protected as there are several regulations and norms the companies need to follow.
4. Acts as barometer for a country’s economy:
The health of the stock market is an indicator of the country’s economic condition. Usually a strong government results in better performance of the markets and vice versa.
5. Broader range of investment avenues:
An investor or trader can invest according to his/her financial goals and also risk appetite. A wide range of financial products are available for wealth creation.
Let us first understand NSE meaning and its benchmark index.
What is nse?
National Stock Exchange (NSE) was founded in 1992 and is in Mumbai. Electronic trading platform was first introduced by the NSE.
Nifty50: Nifty is the abbreviation of National Stock Exchange 50. It is the benchmark index of NSE comprising 50 stocks.
Let us now move on to BSE meaning and its benchmark index.
What is bse
BSE (Bombay Stock Exchange) was founded in 1875 and is the oldest stock exchange in Asia.
Sensex is the benchmark index of BSE and it is derived from the words sensitive and index. Sensex comprises of 30 stocks.
Sensex and Nifty are the face of the Indian stock market as these either go up or down depending on various political and economic factors.
One should trade on BSE or NSE?
Though the number of companies listed on BSE is much higher than NSE, when it comes to trading volume, NSE wins hands down. As huge volumes get traded on NSE, price discovery becomes much easier. Price of stocks varies in NSE and BSE; So, before you wish to buy a stock, compare the price on both the exchanges and decide accordingly. You should also keep in mind that few shares are traded on BSE only.
What is interoperability?
SEBI, the market watch dog has recently introduced the concept of interoperability. To understand this concept, first you should be aware of what a clearing corporation is. This organization takes care of settlement as well as delivery of transactions. As of now, trade executed on NSE can be settled only via NSE Clearing, trade on BSE can be settled via ICCL only. Interoperability allows a stock broker to use any of the clearing corporations for trade settlement irrespective of where the trades have been executed. All stakeholders get benefitted by this move as it reduces compliance cost for stockbrokers which will in turn reduce the cost burden of investors as well.
Other stock exchanges in India:
- Calcutta Stock Exchange Ltd
- India International Exchange (India INX)
- Metropolitan Stock Exchange of India Ltd
- NSE IFSC Ltd
Difference between nse and bse
|Total companies in Index||50||30|
|Known as||The largest stock exchange||The oldest stock exchange|
|Number of listed companies||5000+||1600+|
|MD & CEO||Mr. Ashish Kumar Chauhan||Mr. Vikram Limaye|
|Trading volume||Higher||Lower than NSE|
Once you have clarity on what is the difference between nse and bse, your investing experience in the share market becomes easier as you can choose where you want to buy or sell shares