Indian Stock Exchanges: NSE, BSE Complete Guide
Comprehensive guide to Indian stock exchanges - NSE and BSE history, working, trading systems, market segments, indices, and key differences explained.
Introduction: The Twin Pillars of Indian Capital Markets
“While BSE carries the heritage of Asia’s oldest exchange, NSE revolutionized Indian markets with technology.”
India’s two premier stock exchanges—Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)—together form one of the world’s most dynamic equity markets. Understanding how these exchanges work is fundamental to participating in Indian capital markets.
Bombay Stock Exchange (BSE)
History
Asia’s Oldest Stock Exchange:
- Founded: 1875
- Location: Dalal Street, Mumbai
- Original name: “Native Share & Stock Brokers’ Association”
Key Milestones:
| Year | Event |
|---|---|
| 1875 | Established as informal group |
| 1957 | First exchange recognized under SCRA |
| 1986 | Sensex introduced |
| 1995 | Electronic trading (BOLT) |
| 2005 | Demutualized |
| 2017 | IPO launched |
Sensex
India’s First Equity Index:
- Full name: Sensitive Index
- Launched: 1986
- Base year: 1978-79
- Base value: 100
- Current companies: 30
Sensex Criteria:
- Large-cap, liquid stocks
- Sector representation
- Trading frequency
- Financial soundness
Market Statistics (Approximate)
| Metric | Value |
|---|---|
| Listed Companies | 5,500+ |
| Market Cap | ₹350+ lakh crore |
| Average Daily Turnover | ₹5,000-6,000 crore |
| Market Share (Cash) | ~8-10% |
Trading System: BOLT
Bombay Online Trading System:
- Screen-based trading
- Order-matching algorithm
- Nation-wide reach
- Real-time price discovery
National Stock Exchange (NSE)
History
The Modern Exchange:
- Founded: 1992
- Trading started: 1994
- Headquarters: Mumbai
Why NSE was Created:
- Reform post-1992 Harshad Mehta scam
- Bring transparency
- Nationwide access
- Technology-driven trading
Key Milestones:
| Year | Event |
|---|---|
| 1992 | Incorporated |
| 1994 | Capital market segment launched |
| 1996 | Derivatives segment launched |
| 2000 | Internet trading |
| 2015 | Crossed $1 trillion market cap |
Nifty 50
The Benchmark Index:
- Launched: 1996
- Base year: 1995
- Base value: 1,000
- Companies: 50
Index Criteria:
- Domicile: India
- Listed on NSE
- Float-adjusted market cap
- Liquidity: 6-month trading frequency
- Available in F&O segment
Market Statistics (Approximate)
| Metric | Value |
|---|---|
| Listed Companies | 2,200+ |
| Market Cap | ₹350+ lakh crore |
| Average Daily Turnover | ₹50,000-60,000 crore |
| Market Share (Cash) | ~90%+ |
| F&O Market Share | ~99% |
Trading System: NEAT
National Exchange for Automated Trading:
- Fully electronic
- Order-driven system
- Price-time priority
- Anonymous trading
NSE vs BSE: Key Differences
Market Share Comparison
| Segment | NSE | BSE |
|---|---|---|
| Cash Market | ~90% | ~10% |
| Derivatives | ~99% | ~1% |
| Currency | ~60% | ~40% |
Index Comparison
| Parameter | Nifty 50 | Sensex |
|---|---|---|
| Companies | 50 | 30 |
| Base Year | 1995 | 1978-79 |
| Base Value | 1,000 | 100 |
| Methodology | Free-float | Free-float |
Listing Requirements
| Criterion | NSE | BSE |
|---|---|---|
| Paid-up Capital | ₹10 crore | ₹10 crore |
| Track Record | 3 years | 3 years |
| Profitability | Net positive in 3 of 5 years | Similar |
| Net Worth | Positive | Positive |
Trading Hours
Both exchanges follow identical trading hours:
| Session | Timing |
|---|---|
| Pre-open | 9:00 - 9:15 AM |
| Normal | 9:15 AM - 3:30 PM |
| Closing Session | 3:40 - 4:00 PM |
Market Segments
Capital Market Segment
Cash/Delivery Market:
- Equity shares
- Preference shares
- Debentures
- ETFs
- Sovereign Gold Bonds
Derivatives Segment
Futures & Options:
- Index futures (Nifty, Bank Nifty)
- Stock futures
- Index options
- Stock options
Trading:
- Predominantly on NSE
- Cash-settled
- Expiry: Last Thursday of month
Currency Segment
Forex Derivatives:
- USD/INR, EUR/INR, GBP/INR, JPY/INR
- Currency futures
- Currency options
- Cross-currency pairs
Debt Segment
Fixed Income:
- Government securities
- Corporate bonds
- T-Bills
- Commercial paper
SME Segment
| Platform | Exchange |
|---|---|
| NSE Emerge | NSE |
| BSE SME | BSE |
Purpose: Small and medium enterprises listing
Trading Mechanism
Order Types
| Order Type | Description |
|---|---|
| Limit Order | Specific price |
| Market Order | Best available price |
| Stop Loss | Triggered at price level |
| IOC | Immediate or cancel |
| Day Order | Valid for the day |
| GTD/GTC | Good till date/cancelled |
Order Matching
Price-Time Priority:
- Orders matched by best price first
- Same price → Earlier order gets priority
- Anonymous matching (no counterparty knowledge)
Circuit Breakers
Index-Wide:
| Trigger | Action |
|---|---|
| 10% move | 45-min halt (before 1 PM) |
| 15% move | 1 hr 45 min halt (before 1 PM) |
| 20% move | Trading suspended for day |
Stock-Specific:
- Circuit limits: 2%, 5%, 10%, 20%
- Based on stock category
- Prevents excessive volatility
Settlement Cycle
T+1 Settlement:
- Trade date (T)
- Settlement: Next business day (T+1)
- Funds and securities exchanged
Market Participants
Intermediaries
| Participant | Role |
|---|---|
| Stockbrokers | Execute client orders |
| Depository Participants | Hold securities |
| Clearing Members | Settlement |
| Market Makers | Provide liquidity |
Investor Categories
| Category | Description |
|---|---|
| Retail | Individual investors |
| HNI | High net worth (₹10L+ per order) |
| DII | Domestic institutional investors |
| FII/FPI | Foreign institutional/portfolio |
| Proprietary | Trading with own capital |
FII vs DII
| Aspect | FII | DII |
|---|---|---|
| Origin | Foreign | Domestic |
| Examples | Morgan Stanley, Goldman | LIC, SBI MF |
| Registration | SEBI | SEBI |
| Limits | Sector-wise caps | No foreign limits |
Market Indices
NSE Indices
| Index | Description |
|---|---|
| Nifty 50 | Top 50 companies |
| Nifty Next 50 | 51-100 by market cap |
| Nifty 100 | Top 100 companies |
| Nifty 500 | Broad market |
| Nifty Bank | Banking stocks |
| Nifty IT | IT sector |
| Nifty Pharma | Pharmaceutical |
| Nifty FMCG | Consumer goods |
BSE Indices
| Index | Description |
|---|---|
| Sensex | Top 30 companies |
| BSE 100 | 100 companies |
| BSE 200 | 200 companies |
| BSE 500 | 500 companies |
| BSE Bankex | Banking sector |
| BSE IT | Technology |
| BSE SmallCap | Small companies |
| BSE MidCap | Mid-sized companies |
Index Calculation
Free-Float Market Cap Method:
$$Index = \frac{\sum (Price_i \times Shares_i \times IWF_i)}{Base\ Market\ Cap} \times Base\ Value$$
Where:
- IWF = Investible Weight Factor (free-float)
- Base Market Cap = Market cap in base year
Trading Technology
NSE’s Technology Stack
NEAT Plus:
- Co-location facility
- Ultra-low latency
- Algorithmic trading support
- High-frequency trading enabled
BSE’s Technology
BOLT Plus:
- Upgraded trading platform
- Global connectivity
- Disaster recovery
- Multi-asset support
Co-location Services
What it is: Server hosting within exchange premises
Benefits:
- Minimal latency (microseconds)
- Direct market access
- Used by algo traders
Controversy: 2015 co-location scam at NSE
Regulatory Framework
SEBI’s Role
Securities and Exchange Board of India:
- Regulates exchanges
- Protects investor interests
- Ensures fair practices
- Approves new products
Key Regulations
| Regulation | Purpose |
|---|---|
| SEBI Act 1992 | SEBI’s powers |
| SCRA 1956 | Exchange regulation |
| Companies Act 2013 | Corporate governance |
| Depositories Act 1996 | Dematerialization |
Exchange Governance
Demutualization:
- Ownership separate from management
- Ownership separate from trading rights
- Public listing (BSE in 2017)
How to Start Trading
Step 1: Open Accounts
Required:
- Demat account (DP)
- Trading account (Broker)
- Bank account (linked)
Step 2: KYC
Documents:
- PAN card
- Aadhaar
- Address proof
- Bank statement
- Photograph
Step 3: Choose Platform
| Platform Type | Examples |
|---|---|
| Full-service | ICICI Direct, HDFC Securities |
| Discount | Zerodha, Groww, Upstox |
| Bank-linked | SBI Securities, Kotak |
Step 4: Fund Account
- Transfer from bank account
- UPI transfer
- NEFT/RTGS
Step 5: Place Orders
- Log into trading platform
- Select stock, quantity, price
- Place order
- Confirmation received
Key Takeaways
- BSE is older – Asia’s oldest exchange (1875), heritage value
- NSE dominates – 90%+ cash market, 99% derivatives
- Nifty vs Sensex – 50 vs 30 stocks, both benchmark
- T+1 settlement – India among fastest globally
- Technology driven – Electronic, anonymous, efficient
- SEBI regulated – Investor protection focus
- Multiple segments – Equity, derivatives, currency, debt
Disclaimer
This article is for educational purposes only. Stock market investments carry risks. Prices can go down as well as up. This is not investment advice. Please consult a financial advisor before making investment decisions.
Frequently Asked Questions
Q: Should I trade on NSE or BSE? A: Most traders use NSE due to better liquidity and tighter spreads. For delivery, either works as prices are usually identical (arbitrage).
Q: What’s the minimum amount to start? A: No minimum—you can buy even 1 share. However, ₹10,000-25,000 is a practical starting point for meaningful diversification.
Q: Why is NSE more popular despite BSE being older? A: NSE was designed from scratch with modern technology and transparent practices. It gained trust post-1992 scam reforms and never looked back.
Q: Are stocks listed on both exchanges? A: Many large companies are dual-listed (NSE and BSE). Some companies may be listed on only one exchange, especially smaller ones.
Q: What happens if an exchange goes down? A: SEBI mandates business continuity plans. Exchanges have disaster recovery sites. Trading can continue on the other exchange for dual-listed stocks.
The Indian stock exchange ecosystem, with NSE and BSE at its core, has evolved into a world-class infrastructure that enables millions of Indians to participate in the country’s economic growth story.