- Date : 14/03/2022
- Read: 4 mins
- Read in हिंदी: बीएसई या एनएसई: आपको कहां निवेश करना चाहिए?
There are two regulated places in India where you can buy a stock – the NSE and the BSE. Getting started as an investor can be quite confusing with questions regarding the difference between the NSE and the BSE, and from where to buy and sell stock. Let us understand the difference between these two.
Stock exchanges are places where investors and traders exchange securities for raising money, such as shares and bonds. Securities can be traded with or without assistance from a broker or agent. Stock exchange is an organised and regulated market where financial transactions, such as the sale, purchase, and issuance of shares, take place.
Companies can raise money through the stock exchange. As a platform for selling derivatives and security debts, stock exchange plays a crucial role in building the country's economy.
Let us understand their origin, the difference, and which is better between the two.
Also Read: Top 10 Exchanges in the World.
Understanding the Origin
BSE – The BSE was started in 1875 and is the oldest stock exchange in Asia. In 1986, the BSE introduced SENSEX as the first equity index for identifying the top 30 companies on the exchange. These 30 companies were from 10 different sectors. Today, the BSE ranks among the top 10 most-valued exchanges globally.
NSE – The NSE was started in 1992 and has become the largest exchange in the country. The SEBI gave it recognition in 1993, and its formal operation started in 1994. In 1995, the NSE launched the NIFTY50 index (constitutes top 50 companies on the exchange) and started trading and settlement in dematerialized securities.
Understanding the Exchanges Better
To decide which one is a better option, it is necessary to understand the two exchanges. Technically, there is no difference between the NSE and the BSE. When a company plans to launch its IPO, it gets listed on both exchanges. You can buy and sell the company from any of the two exchanges.
However, certain companies are listed only on one exchange. For example, the BSE itself is a listed company, and if you want to buy the BSE share, you can only do it through the NSE. Similarly, many shares are listed only on the BSE.
Here is an essential tip that can be useful for investors. Let us assume that you buy 1000 shares of ABC Limited on the NSE. If you wish to sell the shares on the same day (before it gets credited to your DEMAT account), you can sell these 1000 shares on the NSE only. However, once the shares are credited to your DEMAT account (T+2), you are free to sell the shares on any exchange.
Key differences between the two exchange
Above we have discussed some basic differences between the two exchanges; let us know about some more differences:
- The BSE has more stocks (7500+) listed as compared to the NSE (1750+)
- The trading volume on the NSE is higher, which means there are more buyers and sellers on the exchange.
- With higher volume, the liquidity is higher on the NSE compared to the BSE.
- The market capitalization of NSE is around Rs 2,66,00,000 crore, while that of the BSE is around Rs 1,99,00,000 crore.
- The network of the NSE is spread across 1500 cities, while the network of the BSE is spread across 450 cities only.
Where should you invest?
If you are a retail investor and want to buy and sell stocks in small quantities, it does not matter which exchange you are using. The NSE is generally a preferred choice for day traders, risking share trading with derivatives, futures, and options. Again, if you are doing big transaction volumes, you should prefer the NSE over the BSE as the liquidity is higher. If you are a beginner, it is recommended that you invest in the BSE. The NSE on the other hand is a suitable option for day traders or seasoned investors.
Ending Note
Ultimately, your main concern should be the quality of the stock you are buying; in most cases, the exchange does not matter. Investors can make their own investment decisions according to their preferences.
Stock exchanges are places where investors and traders exchange securities for raising money, such as shares and bonds. Securities can be traded with or without assistance from a broker or agent. Stock exchange is an organised and regulated market where financial transactions, such as the sale, purchase, and issuance of shares, take place.
Companies can raise money through the stock exchange. As a platform for selling derivatives and security debts, stock exchange plays a crucial role in building the country's economy.
Let us understand their origin, the difference, and which is better between the two.
Also Read: Top 10 Exchanges in the World.
Understanding the Origin
BSE – The BSE was started in 1875 and is the oldest stock exchange in Asia. In 1986, the BSE introduced SENSEX as the first equity index for identifying the top 30 companies on the exchange. These 30 companies were from 10 different sectors. Today, the BSE ranks among the top 10 most-valued exchanges globally.
NSE – The NSE was started in 1992 and has become the largest exchange in the country. The SEBI gave it recognition in 1993, and its formal operation started in 1994. In 1995, the NSE launched the NIFTY50 index (constitutes top 50 companies on the exchange) and started trading and settlement in dematerialized securities.
Understanding the Exchanges Better
To decide which one is a better option, it is necessary to understand the two exchanges. Technically, there is no difference between the NSE and the BSE. When a company plans to launch its IPO, it gets listed on both exchanges. You can buy and sell the company from any of the two exchanges.
However, certain companies are listed only on one exchange. For example, the BSE itself is a listed company, and if you want to buy the BSE share, you can only do it through the NSE. Similarly, many shares are listed only on the BSE.
Here is an essential tip that can be useful for investors. Let us assume that you buy 1000 shares of ABC Limited on the NSE. If you wish to sell the shares on the same day (before it gets credited to your DEMAT account), you can sell these 1000 shares on the NSE only. However, once the shares are credited to your DEMAT account (T+2), you are free to sell the shares on any exchange.
Key differences between the two exchange
Above we have discussed some basic differences between the two exchanges; let us know about some more differences:
- The BSE has more stocks (7500+) listed as compared to the NSE (1750+)
- The trading volume on the NSE is higher, which means there are more buyers and sellers on the exchange.
- With higher volume, the liquidity is higher on the NSE compared to the BSE.
- The market capitalization of NSE is around Rs 2,66,00,000 crore, while that of the BSE is around Rs 1,99,00,000 crore.
- The network of the NSE is spread across 1500 cities, while the network of the BSE is spread across 450 cities only.
Where should you invest?
If you are a retail investor and want to buy and sell stocks in small quantities, it does not matter which exchange you are using. The NSE is generally a preferred choice for day traders, risking share trading with derivatives, futures, and options. Again, if you are doing big transaction volumes, you should prefer the NSE over the BSE as the liquidity is higher. If you are a beginner, it is recommended that you invest in the BSE. The NSE on the other hand is a suitable option for day traders or seasoned investors.
Ending Note
Ultimately, your main concern should be the quality of the stock you are buying; in most cases, the exchange does not matter. Investors can make their own investment decisions according to their preferences.
