The two largest and most prominent stock exchanges in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). While the BSE has the distinction of being the oldest stock exchange in Asia, established in 1875, the NSE has quickly grown to prominence since its creation in 1992. While these two markets dominate in India there are clear differences between the two that can impact your decision to invest in the BST vs. the NSE.
The BSE’s long lifespan has resulted in it having more than 5,400 listings and a market capitalization of more than $1.6 trillion, both of which are larger than the NSE. The key issue that holds many back from investing in the BSE is that it is not incredibly liquid and the concept of day trading is not firmly established on this market. Investing here tends to be more long-term focused, so looking to the fundamental aspects of a company before investing is certainly recommended.
SENSEX is the key index used on the BSE for investing in a broad base of companies, though indices exist for mid-cap, small-cap, and the top 100 and 200 companies on the exchange also. These indices also have US dollar-denominated aspects and are considered to be good broad-based indicators of emerging market economies.
The NSE has nearly 1,700 listings and a market capitalization of $1.4 trillion, so with fewer companies, its total value is close to that of the BSE. The NSE is far more active and day trading does take place on the exchange, and the fraud and transparency protections of NSE listings are considered far better than those of the BSE. Before the creation of the NSE stock markets in India were plagued with fake certificates and fraudulent transactions, however since the NSE the
The key indices used on the NSE are the Nifty and the Nifty junior and ETF’s tied to these indices are traded both on the NSE and major U.S. and European based exchanges. One of the key drivers for both the NSE’s integration with other markets and the high degree of activity there is that it was created and is owned by major financial institutions and banks in India.
When choosing where to invest when it comes to Indian stock markets it really depends on where the companies you want to invest in are listed and what type of trading you like to do. Some companies are listed on both exchanges but for many companies, you want to invest in you may not have a choice on which exchange to use. For day traders the high liquidity and sophistication of the NSE make that exchange the logical choice. Ultimately, however, if you’re investing based on preference for certain companies the listing or exchange they happen to be on should not influence your decision on whether or not to invest in that company.