Differences Between NSE and BSE

BSE is the oldest stock exchange of India established in 1875, which stands for Bombay Stock Exchange, whose benchmark index is SENSEX giving top 30 stock index. In contrast, NSE is the biggest stock exchange of India established in 1992, which stands for National Stock Exchange whose benchmark index is Nifty, giving the top 50 stock index.

The stock exchange is an intermediary that facilitates an investor purchasing and selling shares, bonds, debentures, and other financial instruments. BSE (Bombay Stock Exchange) and NSE (National Stock exchange) are India's eminent and vital stock exchanges.

BSE was established as 'the Native Share & Stock Brokers' Association' in 1875 and has been the oldest stock exchange in Asia. This stock exchange provides a transparent and systematic mechanism for trading in equity, currencies, debt instruments, derivatives, and mutual funds. The other facilities provided by the exchange involve clearing, settlement, risk management, market data services, and education. The S&P BSE SENSEX, which we term as the SENSEX, is the benchmark index that comprises the 30 most actively traded and financially strong Indian companies listed on BSE.

NSE was incorporated in 1992 and was recognized as a stock exchange in 1993 under the Securities Contracts (Regulation) Act, 1956. This leading stock exchange of India caters to a variety of services to the capital market participants that include trading, clearing, and settlement in equity, equity derivatives, debt, and currency derivatives segments. The benchmark index of NSE is NIFTY, which represents a weighted average of the 50 most highly liquid and frequently traded Indian companies listed on NSE.

Here we provide you with the top 12 differences between NSE and BSE.

It is important to gauge the key difference between NSE and BSE. This will give us additional clarity on the subject matter.

• BSE is Asia's oldest stock exchange and has been recognized as the fastest stock exchange globally. Incorporated in 1875, BSE has been the first to be granted permanent recognition under the Securities Contract (Regulation) Act, 1956. The exchange had designed the screen-based automated trading mechanism termed the BSE On-Line Trading (BOLT) in 1995. NSE has been affiliated with being the country's leading stock exchange and was the first to have launched an electronic screen-based automated trading system in 1994.
• The benchmark index of BSE, named SENSEX, includes the top 30 well-established companies. The index of NSE, termed Nifty, depicts the 50 most actively traded companies. The stocks belong to diversified sectors such as FMCG, Banking and Finance, Auto, Healthcare, Oil & Gas, etc. The Sensex is currently trading at a P/E ratio of 22.03x. The Nifty is trading at a P/E ratio of 24.83x as of October 2018.
• Some of the top traded companies on BSE with high market capitalization are Reliance Industries Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd, ITC Ltd, Hindustan Unilever Limited, etc. Some of the actively traded securities on NSE as per the October 2018 transactions involve Indiabulls Housing Finance Ltd, Reliance Industries Ltd, HDFC Ltd, Infosys, etc.
• BSE provides various facilities such as depository services through the Central Depository Services Ltd. (CDSL), risk management, clearing, and settlement. The BSE Institute Limited is the exchange's acclaimed capital market educational institute. NSE played a vital role in establishing the first depository in India called the NSDL (National Securities Depository Limited). The clearing and settlement process of NSE transactions is undertaken by National Securities Clearing Corporation Ltd. (NSCCL).
• Arbitrage is a strategy implemented by traders to use the price difference between two or more markets to earn a profit. The price of a security may differ on BSE vs. NSE. An arbitrageur will buy the security in the exchange where it is quoted at a lower price and simultaneously sell the same in the other exchange where it is traded at a higher price. The trader must follow the rules outlined for engaging in arbitrage.

Let's now look at the head to head difference between NSE and BSE

Though BSE has been the oldest stock exchange in India, NSE was the first to launch an automated electronic screen-based trading system in India. The Securities and Exchange Board of India (SEBI) has recognized the stock exchanges. The corporate offices of BSE and NSE the exchanges are located in Mumbai. BSE and NSE have a nationwide existence and cater to customers located across the globe.

BSE and NSE both play an extremely crucial role in providing an effective, formalized, and transparent mechanism to the market participants for trading in diversified financial securities. The processes have been designed to provide high-quality services, protect the market ethics, and drive the development of the Indian capital market.

This has been a guide to the top difference between NSE and BSE. We also discuss the BSE vs. NSE key differences with infographics and a comparison table. You may also have a look at the following articles –

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