Invest in NSE or BSE stocks?

I came across a common question from many of our subscribers "whether to invest in BSE or NSE stocks?"

Just for the sake of clearing the basics, NSE stands for National Stock Exchange and BSE stands for Bombay Stock Exchange. NSE is the biggest stock exchange in India, while BSE is Asia's oldest stock exchange. Keeping the number of cities it covers, the volumes traded in NSE are way more than that traded in BSE.

Coming to the answer, if you are an investor in India who want to invest in shares of new companies, BSE would be an ideal choice. But if you are a day trader interested in trading with derivatives, futures, and options, NSE would be the preferred choice because of its liquidity. Technically, NSE has better software for high-risk online transactions which is a good point of preference in this digital era.

Although NSE has very few stocks that are listed when compared to BSE which is huge, in terms of liquidity, NSE is preferred over BSE.

Why are we referring to liquidity repeatedly?

Liquidity simply means the ability to convert stock into cash with ease. Liquidity is an indicator of the financial health of a business. Market makers will be able to buy and sell rapidly and there is less risk that they'll be left with an unwanted position in the stock.

Conclusion:

The NSE is generally a preferred choice for day traders, risking stock trading with derivatives, futures, and options. Again, if you are doing big transaction volumes, you should prefer the NSE over the BSE as the liquidity is higher. If you are a beginner, it is recommended that you invest in the BSE.