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The following article was published in our article directory on June 28, 2010.
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BSE & NSE - What's different? What's common?

Article Category: Finances

Author Name: Sumedh Inamdar

It is natural to question about NSE & BSE by anyone who is new to trading. Why there are 2 exchanges? Why there are 2 indexes (Sensex & Nifty)? Where should he trade generally?

Let us try to understand them, their differences and commonalities

1. What is BSE? – BSE is a very old stock exchange, founded in 1875

2. What is NSE? – NSE is relatively new to the game, founded in 1994

3. NSE has a more sophisticated technology, being the newer entrant

4. BSE has more number of stocks listed (World no – 1, around 8000 companies listed) and more total market cap than NSE.

5. BSE has much more number of midcap, smallcap and penny stocks listed. So, if you are interested in high risk-high return, low volume trades of penny stocks, BSE is the place to be at.

6. Volume of shares (liquidity) is much more on NSE, than BSE.

7. If derivatives is your area of interest, you can't rely on BSE. Practically, NSE is the only player in derivatives.

8. What is Sensex? - Sensex is the primary index of BSE – weighted avg. of 30 blue chip shares, formed in 1986.

9. What is Nifty? - Nifty is the primary index of NSE – weighted avg. of 50 blue chip shares, formed in 1995

10. Even though Nifty has more companies than Sensex, their movements are almost always correlated.

11. Index funds mostly track themselves against Nifty, as NSE has more volumes

12. Overall, BSE is losing ground. They recently slashed their membership fees to Rs. 10 lakh from 1 crore, in order to gain some ground.

13. You can use the difference in quotes to buy at one exchange and sell at the other quickly, to make small amounts. This is called "Arbitrage Trading".

Where should I trade?

If you want to play in small cap stocks, BSE offers much more opportunity.
For all other purposes, like regular retail investment, and also derivative trading, NSE is the place to trade.

For a retail investor, it does not matter much. In general, the thumb rule for cash segment (regular delivery trades) is you check if the stock is listed at NSE, if yes, buy it on NSE, else buy on BSE. The minor difference in quote won't matter for most practical purposes. The quote that you see in your trading platform, and the actual price that you get delivery for, might be slightly different, especially for low volume mid cap stocks. What matter more, is what stocks you buy! Moneyvidya can of course be of great help you to choose good stocks to buy for short term, and long term. Moneyvidya has been integrated to both BSE, and NSE, so you can find NSE stock tips, as well as BSE stock tips here.

Keywords: Indian Stock tips, BSE stock tips, Indian share tips

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