Some of the common questions which prevails across minds of most equity investors, especially the new ones are:
“Where should I invest in stocks in India?”
“Should I invest in stocks on NSE or BSE?”
\”Can I sell shares purchased on NSE in BSE?\”
\”Can I sell shares purchased on BSE in NSE?\”
\”What is NSE Nifty?\”
\”What is BSE Sensex?\”
In this article let\’s take a detailed look at the differences between and NSE and BSE as well as the answers to most commonly related questions asked by investors.
A brief history of BSE & NSE before we proceed to tell you where you should invest in stocks in India
As you might already know NSE and BSE are top stock exchanges in India. NSE established in 1992, is the biggest stock exchange in India, while BSE is the oldest stock exchange in India which was established in 1875.
What is NSE NIFTY?
NSE has a benchmark index known as NIFTY . The value of NSE NIFTY index is derived from 50 of the biggest companies listed on the NSE in terms of market capitalization and most frequently traded companies listed on the exchange.
What is BSE Sensex?
Just like the NIFTY, the BSE SENSEX (Sensitive Index) is benchmark index of the BSE which derives its value from the weighted average value of the top 30 companies listed in the stock exchange.
BSE & NSE are the biggest stock exchanges in India with high liquidity where you can invest in stocks in India
Apart from the two, earlier there were many other stock exchanges in India like the Hyderabad Stock Exchange, Bangalore Stock Exchange Ltd., Coimbatore Stock Exchange Ltd., Mangalore Stock Exchange Ltd., Ludhiana Stock exchange Ltd., Gauhati Stock Exchange Ltd. etc. which have become defunct.
Can you sell shares purchased on NSE in BSE or vice versa?
Yes, it is possible to sell shares purchased on NSE in BSE or vice versa. But not on the same day.
Let\’s understand this with the help of an example.
Suppose you placed an order to buy 100 shares of XYZ company on NSE. If for some reason you wish to sell the shares on the same day or if you have purchased it for intraday trading, you will have to sell the shares on NSE itself and cannot sell it on BSE.
On the other hand if you have purchased the shares on a delivery basis, you can sell the same on BSE once it is credited to your demat account. The normal time taken for the exchange to credit the shares in your demat account is two days.
Investing in BSE or NSE stocks does not matter as much as the quality of the stock you invest in matters
There are over 1700 companies listed on NSE while over 5500 companies are listed on BSE. It does not really matter which exchange you choose to invest in stocks as both exchanges are equally good in terms of the services they offer to investors. Rather than looking at the exchange, one should choose the stock for investment very carefully because that is what actually matters the most.
This reminds me of a famous story.
A man used to sell helium balloons of different colours outside the village. Whenever his sales were down, he used to release a balloon in the air. Seeing the balloon in the air, children in the village would come and buy balloons from him. One day a little boy asked him “Uncle if you release a black balloon in the air, would it still go up?”
The balloon seller replied “Son it is not the colour of the balloon which matters. It is what is inside which matters”.
Similarly the exchange which you choose to invest in stocks does not matter. Both BSE and NSE are equally good and offer a robust technology platform for buying and selling stocks.
However, investors should note that there is always a minor price difference between NSE and BSE. For example if XYZ stock is trading at Rs.100 on NSE the price displayed could by Rs.99.
Irrespective of this difference in price, the brokerage charged by the broker and the Securities Transaction Tax remain the same on both NSE and BSE. Volumes of shares traded on NSE are generally high, so it would be a good thing to sell on NSE if you are selling a huge quantity of stocks. Some shares are not traded on the NSE, and in such cases you can only buy or sell the shares on the BSE. Examples of stocks which can be traded only on BSE include stocks like Claris Lifesciences and Spice Jet.
Most share brokers are generally members of both BSE and NSE stock exchanges. So you have the option of investing in stocks either on BSE or NSE. The volume of shares trading on NSE is generally high as compared to BSE. This matters only when you are buying and selling in huge quantities.
When you invest in stocks be more concerned about the quality of stocks rather than the exchange, BSE or NSE
To summarize, both BSE and NSE are an important part of India\’s equity markets and used everyday by millions of investors.
It does not really matter whether you are investing in NSE or BSE as long as you invest in stocks which are fundamentally strong and wait patiently for them to grow and realize their true potential.
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This article was last updated on 24/02/21.