Indian Stock Exchanges - Are They 2 Different? PDF Print E-mail
Written by Sumedh Inamdar   
Tuesday, 27 July 2010 10:42
When one just starts to explore stock markets, his first question is obviously, how to determine which stocks to 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.
by SumedhInamdar


When one just starts to explore stock markets, his first question is obviously, how to determine which stocks to 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.

You always also have this second question in mind. Why there are 2 exchanges in India? Why there are 2 indexes (Sensex & Nifty)? Does it really matter? Why should someone trade in one place, or the other?.

Let' see their pros and cons against each other one by one.

1. What is BSE? - BSE is the grand daddy of stock markets (oldest in Asia - founded in 1875)

2. What is NSE? - NSE is newer kid on the block (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 to be your exchange of choice if you want to deal a lot in small caps.

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

7. NSE has much more volume of derivatives (futures & options). BSE is almost non-existent in it.

8. BSE has the famous primary index, Sensex, formed by top 30 shares.

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. Generally speaking, NSE has gained a lot of ground in last 10 years, and BSE is lagging behind.

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".

Which one is better? If you want to play in small cap stocks, BSE offers much more opportunity. Otherwise, generally speaking, if the stock you want is available at NSE, go for NSE. It has better volumes, better technology.

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!

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Moneyvidya is an Indian startup that helps you choose the best stocks to buy. It is done by tracking the performance of all the stock tips on several parameters like profits and consistency.