BSE & NSE - Stock Exchange in India, Investing in Stock Markets | Investing in Stock Markets - B Com PDF Download

Stock Exchange is a marketplace, where securities can be freely traded between investors with the help of members i.e. brokers. It is a great platform for purchasing and selling securities, debt and derivatives. It is a key indicator of financial strength of the country’s economy. In India, there are two major stock exchanges, Bombay Stock Exchange, and National stock exchange. Bombay Stock Exchange is shortly known as BSE; it is the first stock exchange of the continent.

On the contrary, National Stock Exchange, abbreviated as NSE is the first stock exchange which introduced an advanced electronic trading system in the country. To a layman, there is no difference between these two exchanges, but there slight and subtle points of distinction amidst the two, which are explained in the below.

Bombay Stock Exchange (BSE)

Bombay Stock Exchange is the ancient securities exchange of the continent, formerly known by the name of ‘The Native Share & Stock Brokers Association’ in the year 1875.

In 1957, BSE was recognised by the Central Government of India as the premier Stock Exchange of the country, under the Securities Contract Regulation Act, 1956. SENSEX is introduced, as a first equity index in 1986 to provide a base for identifying the top 30 trading companies of the exchange, in more than 10 sectors. In the year 1995, BSE Online Trading System (BOLT) was started. The Association of person is converted into a  Separate Legal Entity with the name of Bombay Stock Exchange Limited, in 2005.

On the basis of registered members, it stood first in the list of top stock exchanges across the world. It offers a diversified range of services in various areas like depository services through CDSL (Central Depository Services Limited), risk management, market data services, etc. BSE Institute Limited is one of the renowned capital market educational institute of Bombay stock Exchange.

National Stock Exchange (NSE)

National Stock Exchange is the youngest stock exchange of the country which came into force in the year 1992. At the time of its establishment, it introduced the advanced electronic trading system for the very first time in the country which removed the paper-based settlement system.

The promotion of NSE is done by top financial institutions of the country and the world as well, on the recommendation of Indian Government in order to bring transparency and integrity in the securities exchange system on the Stock Market. In 1992, NSE was set up as a tax paying company which later on registered as a Stock Exchange under the Securities Contract Regulation Act, 1956, in the year 1993. In 1995, National Securities Depository Limited (NSDL) was formed to provide depository services to the investors.

Nifty is the popular index, which was introduced by National Stock Exchange in 1995, to act as a basis for measuring the performance of the exchange. It lists out top 50 companies which traded on the exchange.

Key Differences Between BSE and NSE

The major differences between BSE and NSE are as under:

1. BSE and NSE are the top securities exchange of India, where BSE is the oldest one while NSE is the youngest one.
2. Globally, BSE stood in the 10th position in the list of top stock exchanges which is followed by NSE.
3. NSE was the first to introduce the modernised trading system in the country in 1992 while BOLT was introduced by BSE in 1995.
4. BSE’s index is known by the name SENSEX (Sensitive Index) which shows 30 top trading companies. Nifty (National Fifty) is the index of NSE, displays 50 most traded companies.
5. BSE started as an Association of persons in 1875, which was accredited as a stock exchange in 1957. NSE was founded in 1992, as a tax paying company, but later on, in 1993 it was recognized as a Stock Exchange.

Conclusion

Bombay Stock Exchange and National Stock Exchange both played a vital role in the reformation of Capital Market of India. Millions of investors and brokers transact on a daily basis through these trade exchanges. Both the stock exchanges are located in Mumbai, Maharashtra as well as recognised by the Securities and Exchange Board of India (SEBI).

BSE is the first stock exchange of the country but the advancement of the Indian stock market is pioneered by NSE like the replacement of paper-based settlement system, the introduction of clearing and settlement system through National Securities Clearing Corporation Ltd. (NSCCL), the formation of NSDL, internet trading, etc.

Top trading companies by market capitalization of the exchanges include TCS, ONGC, HDFC Bank, Sun  Pharma, Reliance Industries Limited, SBI, ITC, Coal India, ITC Limited and much more.

Comparison Chart