NSE vs BSE: What are they and How do they work?

The financial section of a newspaper often intimidates people with terms like stock exchange, Dalal Street, bulls and bears. There is an association of discomfort and the feeling of being thrown in the deep end with these words for beginners or the uninitiated. However, these are just words, and the only way to be comfortable with them is to know what they mean. Read on and you’ll be surprised how uncomplicated these things really are.

Before we go into the NSE and BSE differences, let us start by finding out what stock markets and stock exchanges are. Stock market is a secondary market wherein trading in stocks takes place. After an Initial Public Offer (which takes place in the primary market), companies can list their shares on the stock market and people can choose to buy these stocks.

A stock exchange is an organized platform or market, where buyers connect with sellers and trading of stocks, bonds and other securities takes place. It’s a common place where companies make their stocks available for being sold, and investors can buy and trade these stocks between themselves. An important part of using stock exchanges is understanding the relationship between exchanges and companies. Exchanges provide a transparent space for trading in stocks, and there are many such places around the world. In India, two major stock exchanges are NSE and BSE.

What is BSE?

BSE, which was earlier known as Bombay Stock Exchange, is the oldest stock exchange in Asia and figures in the top 10 stock exchanges globally in terms of market capitalization. Founded in 1875, BSE has played a pivotal role in developing the capital market space in India. Today, it lists almost 6,000 companies, and with a trade speed of 6 microseconds, it is credited as the fastest exchange in the world. To put things in perspective, that’s less than the time it’ll take you to say “whoa!” Moreover, Sensex (BSE’s equity index), is one of the most widely tracked indexes in the country.

What is NSE?

National Stock Exchange or NSE is India’s leading stock exchange. Incorporated in 1992, NSE paved the way for dematerialized and fully automated trading in India. It was established by a group of financial institutions with the objective of bringing increased transparency to capital market trading, and it continues to see the majority of derivatives trading in the country.

How do NSE and BSE work?

When it comes to the process of trading, there is no NSE vs BSE. Both of these are exchanges where trading occurs and give an indication of the strength of the country’s economy. To make the entire thing simple, here is a basic flow of how things happen:

• A company that wants to attract investors conducts an IPO and registers itself on a stock exchange
• The company produces stocks which are available for investors who have an online trading and demat account
• Investors buy these stocks based on their reputation and health. This is gauged via Nifty and Sensex. Nifty is the index for the 50 stocks listed on NSE and Sensex is the index for the 30 listed on BSE
• A stock price goes up or down depending on the progress of the company to which it belongs. Growth corresponds a rise in the company’s stock price on Nifty or Sensex, and investors use this information to make buy/sell decisions
• Stock transactions are regulated by NSE and BSE, giving investors and businesses complete transparency and accountability

Differences between BSE and NSE

Reasons why companies get listed on exchanges

It is in the best interest of companies to get listed on exchanges, since it boosts their prospects of getting investments and becoming a name known to all the people in the world of trading. There are a few other specific reasons for companies to get listed on exchanges.

• Transparency and Accountability

When all the trading takes place on a central, authentic platform, investors have that security in the back of their minds which makes them comfortable to trade in stocks. Companies also know that transparency is the definite outcome of things done in the digital space where transactions can be traced, which also makes it easier for investors to participate in trading since they know that the companies also have to follow listing agreements and provide all the necessary details on the exchanges.

• Better Transaction Speeds

Online trading is something that transgresses any NSE and BSE difference since promptness is always a deal maker when it comes to trading. Prices are volatile, and by getting listed on exchanges, companies give investors a better crack at finding the price which seems attractive to them.

• Better Reach

Much like everything else, the digital space increases the reach of any company which wants to make its stocks available to investors. Online trading platforms can be accessed via any internet enabled device, and this opens the company and its stocks to a much larger pool of investors.

List of Stock Exchanges in India

Something that can get lost in the BSE vs NSE discussion is that there are options stock exchanges in India. Here’s a list of all of them:

• National Stock Exchange of India Ltd
• BSE Ltd
• Metropolitan Stock Exchange of India Ltd
• Calcutta Stock Exchange Ltd
• NSE IFSC Ltd
• India International Exchange (India INX)

Although investing in the stock market is often called a gamble, which is something that deters people to enter the world of trading, this is not really the case if you get the basics right. One of these is to choose a broker registered with SEBI to ensure safety of your funds. You can also choose to open an account with Niyo Money where you can set trade in domestic and international stocks and get latest recommendations based on real-time insight. We also help you complete the necessary formalities, i.e. opening a trading and demat account, becoming KYC compliant, etc. to help you set up your account easily, and provide a trading platform for the best stocks to buy/sell on the exchange. To begin your trading journey, download the Niyo Money app from Play Store or App Store today!