NSE vs Its Peers: A Comparative Analysis of India’s Leading Stock Exchange

The Indian capital market has changed entirely in the last three decades, and at the helm of this change is the National Stock Exchange. With its base as an exchange known for technological innovation, high liquidity, and a strong compliance framework, the NSE has emerged as the front-runner in the field of stock exchanges in India. But to understand its true significance, it’s essential to compare NSE with its peers—both within India, such as the Bombay Stock Exchange, and international giants like the NYSE and NASDAQ. In this blog, we try to assess how NSE stands in relation to such exchanges in terms of infrastructure, product offerings, market depth, and global relevance.

1. NSE Dominance in Volume & Liquidity

• NSE persistently demonstrates much higher volumes of trading and liquidity relative to BSE in the Cash Equity Segment and, particularly, in Derivatives Segment (F&O).
• A recent analysis shows that more than 90% of equity derivatives trading in India takes place on NSE till 2024..
• In the cash equity segment, NSE often handles 80% or more of daily trades, while the rest -much smaller - goes through BSE

2 .Cash Market (Equities): NSE vs BSE

• NSE's average daily turnover (ADTV) in cash equities is many times that of BSE. Some recent data shows BSE's daily cash-market turnover to be a small fraction of NSE's
• Because of this high volume and deep liquidity on the NSE, the bid-ask spreads are usually tighter, with better price discovery for liquid stocks.
• While BSE still lists many more companies than NSE, including many thinly traded and small/micro-caps, execution is often less efficient because of lower volumes.

3.Derivatives Market (Futures & Options)

• The derivatives business-index futures, stock futures, options-is overwhelmingly dominated by the NSE. Of the total derivatives volume in India, NSE is reported to have a share of around 93-94%, according to recent data.
• In the latest monthly snapshot, April 2024, it is reported that NSE processed 849.4 crore contracts, while BSE handled 222.4 crore, underlining the wide gap in derivatives activity.
• The NSE leads in derivatives, a position consolidated by a continually high turnover and contract volumes, placing it among the largest derivatives markets in the world.

4. NSE vs. Global Peers

While comparing NSE with global exchanges, the main benchmarks are NYSE, NASDAQ, and the London Stock Exchange.

• Market Capitalization: The NSE's total listed market cap is way less compared to those of NYSE and NASDAQ, representing India's growing but still developing capital market size.
• Trading Volumes: With the relatively smaller market capitalization, NSE remains among the world frontiers in derivatives trading volumes.
• Technology: NSE has a globally competitive trading infrastructure in terms of latency and up-time.
• Investor Base: Retail participation in India has gone up, but the global exchanges have wider international participation and deeper institutional flows.

Key Financial Metrics Comparison (NSE vs BSE)

5. Strengths and Challenges of NSE

Strengths

• High liquidity, especially in derivatives
• Advanced technology suited for high-frequency and algorithmic trading
• Strong regulatory environment reinforcing investor confidence

Challenges

• Reliance on derivatives for the majority of volumes
• Growing competitive pressure from BSE in certain segments
• Limited global integration compared to NYSE or NASDAQ

Conclusion

NSE has now grown into the backbone of modern financial markets in India, with unmatched liquidity, technology, and investor participation. Compared with its domestic peer, BSE, NSE commands a dominant leading position in the derivatives and trading volumes, although BSE retains relevance through legacy, SME listings, and niche products. On a global basis, NSE is positioned as one of the few advanced and rapidly growing exchanges, even as it operates on a smaller scale than the global giants.