Do NSE and BSE Stocks Rate Depend on Each Other?

Do NSE and BSE Stocks Rate Depend on Each Other? 

The NSE and BSE are inextricably linked as two of the country’s premier stock exchanges. However, the impact of stock rates in one exchange is hard to forecast for the other stock exchange. 

An introduction to BSE and NSE 

Bombay Stock Exchange (BSE) is the numero uno Indian stock exchange situated at Mumbai’s Dalal Street. It was set up by Premchand Roychand, one of the most iconic businessmen in the 19th century. He made a hefty fortune in stock-broking and eventually came to be known by the moniker Big Bull or Bullion King or even Cotton King. 

BSE is Asia’s oldest ever stock exchange and it was previously known as The Native Share & Stock Brokers Association back in the year 1875. The legend goes that the BSE actually started in the year 1855 when 22 leading stockbrokers met under several banyan trees right in front of Town Hall in Mumbai. The meeting locations were frequently changed for accommodating a growing number of stockbrokers. While you have been tracking the S&P BSE 100, you should know that a group of prominent traders shifted in the year 1874 to Dalal Street. BSE received official recognition in 1957 courtesy of the Central Government in India and it became the premier Indian stock exchange as per the Securities Contract Regulation Act of 1956. 

In the year 1986, the BSE SENSEX came into being as the very first equity index which offered a base for the identification of the top 30 trading entities in the exchange. This covers 10+ sectors. In the year 1995, BOLT (BSE Online Trading System) was established. BSE provides numerous services including risk management, market data services, depository services and CDSL (Central Depository Services Limited). BSE is also the 10th biggest stock exchange marketplace globally with the market capitalization surpassing $2.3 trillion as of April 2018. Along with SENSEX, other vital BSE indices include BSE 100, BSE 500, BSE 200, BSE SMALLCAP, BSE MIDCAP, BSE Pharma, BSE Auto, BSE PSU, BSE FMCG (Fast Moving Consumer Goods), BSE Metal and BSE Consumer Durables. 

The National Stock Exchange (NSE) is the country’s youngest exchange which emerged in the year 1992. NSE was India’s first-ever exchange which offered a completely automated and screen-based system for electronic trading and was completely contemporary. It enabled easier trading facilities for investors, spread throughout the whole country. NSE came up with a highly advanced electronic system of trading in 1992. This helped in doing away with paper-based systems of a trading settlement. In the year 1993, NSE came up as a tax-paying entity which eventually got registration as a stock exchange under the Securities Contract Regulation Act. 

The security system of NSDL enables investors to securely transfer and hold bonds and shares through the electronic format. Alongside, it enables investors to readily trade and hold even a single bond or share likewise. The security system of NSDL was fused with the efficiency, transparency and lower prices of transactions that were offered by NSE. This enhanced the overall Indian stock market’s appeal for both global and domestic investors. Nifty 50 also got introduced by NSE earlier as listing out the top 50 companies which traded on the NSE. The trading system is a cutting-edge platform for NSE and has already witnessed a major technological leap over the last two decades. In 1994, NSE’s advanced technology covered two orders each second while this went up to 60 orders each second in the year 2001. NSE can cover a whopping 1,60,000 orders every second with ample scalability alongside. The settlement cycles have come down to T+2 days as compared to T+3 days previously. Some financial products have seen cycles lowering to T+1 day as well. Other indices of NSE include CNX 100 (S&P CNX Nifty + CNX Nifty Junior), CNX Nifty Junior and S&P CNX 500 (CNX 100 + 400 key players throughout 72 Indian industries) along with CNX Midcap. 

How stock rates/prices pan out in the NSE and BSE

The difference in share prices is always acceptable to an extent since both the NSE and BSE are quite different stock exchanges. There is a significant difference in volumes that have been traded for both exchanges, which is the key reason for the difference in diverse conditions and prices prevalent for each stock exchange. 

The stock price at both of the exchanges will remain absolutely the same. The maximum difference, in this case, will be about 1%. Genuine and sustainable volumes from a diverse mix of participants, relevant to multiple kinds of asset classes will come into play. These are equity, both derivatives and cash and also currency derivatives. They ensure better liquidity and depth which are the two most vital components when it comes to trading financially in the stock market. Hence, it is hard to work out accurately whether stock rates in one exchange will fully depend upon rates in the other exchange. It depends on diverse parameters and other factors including market performance, company financials, business decisions and other market movements, derived from several global factors.