The Bombay Stock Exchange, retaining its original name even after its home city was renamed Mumbai in 1995, boasts a rich history as the first stock exchange in Asia. Established in the 1850s by a group of five stockbrokers who used to hold meetings under a banyan tree in front of Mumbai’s Town Hall, it has grown significantly since its humble beginnings.
Today, it stands as the largest exchange in India. This guide provides insights into how UK investors can gain exposure to the thriving Bombay Stock Exchange.
What is the Bombay Stock Exchange?
Officially founded in 1875, the Bombay Stock Exchange (BSE) is the world’s 10th-largest stock exchange by market capitalisation, ahead of the National Stock Exchange of India (NSE). It has over 5,000 listed companies and a total market cap of over $2 trillion.
Top companies to invest in from the Bombay Stock Exchange
The Bombay Stock Exchange may not typically include household names that are well-known in the UK, but that doesn’t mean there aren’t any that have the potential to pack an investment punch.
There’s no such thing as the “best” company to invest in on any exchange, as it depends on your investment strategy and your appetite for risk. The 3 biggest companies on the Bombay Stock Exchange by market capitalisation as of July 2023 were:
Reliance Industries Ltd: A conglomerate with operations spanning oil and gas production, the manufacture of petroleum and polyester products, plastics, chemicals, synthetic textiles and fabrics.
HDFC Bank Ltd: One of India’s largest private sector banks.
Tata Consultancy Services Ltd: A global IT services, consulting and business solutions firm.
Can I invest in the Bombay Stock Exchange from the UK?
Yes, you can invest in the Bombay Stock Exchange, and there are a number of direct and indirect ways to do so. You can invest in many Indian companies through American Depository Receipts (ADRs), which represent stocks that have been purchased by an American institutional investor on the BSE, which can then be traded on US-based stock exchanges.
You can also invest directly in BSE stocks via exchange-traded funds (ETFs), which are index funds that track the performance of certain stocks or stock indices on the Bombay Stock Exchange.
Some of the largest Indian stocks may also be available to buy and sell on popular Western exchanges, including the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE). For example, the largest company on the BSE, Reliance Industries, is also listed on the LSE, which means you can buy shares in it directly using your UK trading platform or broker.
Open a share trading account. Once you’ve selected the broker or platform, you’ll need to open a trading account to start investing in BSE stocks.
Deposit funds. Before you start trading, you’ll need to deposit money into your investing account. Depending on your broker or platform, your funds may also need to be converted from pounds into a different currency, such as US dollars.
Buy BSE stocks or invest in funds. Once your account is funded, you can buy and sell shares in BSE companies or invest in funds. You can use the platform’s search function to find the specific Indian stock or ETF you want to invest in.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
How much does it cost to invest in the Bombay Stock Exchange?
The cost of investing in the BSE depends on how you decide to invest, as well as the specific platform or broker you use. Each platform has its own fee structure, with some charging a one-off trading fee for every trade you make and others offering “fee-free” trading.
If you’re looking to invest in the Bombay Stock Exchange via an ETF or index fund, you’ll probably be charged a small percentage fee of around 0.5%.
Broker trading fees
Below is a breakdown of the basic fees you’ll pay when making a single trade using each platform or broker:
Yes – in fact, there are several ETFs that track different chunks of the exchange.
ETFs are an easy, low-cost alternative way to invest in Indian stocks on the Bombay Stock Exchange, especially if you’re looking to invest in stocks that aren’t listed on Western exchanges such as the London Stock Exchange (LSE).
Like many ETFs, the most popular Indian stock ETFs are based on the leading BSE stock indices, such as the BSE SENSEX, which tracks 30 of the largest companies on the Bombay Stock Exchange, and the BSE 500, which tracks the 500 largest companies on the BSE. You can also find ETFs that track different sectors of BSE companies, including small- and medium-sized enterprises.
Bombay Stock Exchange ETFs
Some of the largest BSE ETFs include:
iShares Core S&P BSE SENSEX India ETF
SBI – ETF SENSEX
HDFC Sensex ETF
iShares MSCI India ETF
WisdomTree India Earnings Fund
Invesco India ETF
iShares India 50 ETF
Why should I invest in the Bombay Stock Exchange (BSE)?
The Bombay Stock Exchange is one of the world’s largest exchanges and lists many companies that you cannot invest in directly via the London Stock Exchange or other western exchanges. Like China – and Hong Kong in particular – India is an emerging market experiencing rapid economic growth. This may be reflected in the potential growth of Indian companies listed on the BSE.
Indian stocks may, therefore, be a good option for investors looking to diversify their portfolio internationally or get exposure to different sectors or industries. Though, bear in mind that stock markets in emerging economies tend to be more volatile. Plus, even big companies in India – and indeed the stock market itself – may operate in some ways that Westerners are less familiar with. So, plan and research carefully and be prepared for unexpected outcomes.
While the Bombay Stock Exchange may be the largest Indian stock exchange by market capitalisation and the tenth-largest in the world, it’s not the only stock exchange based in Mumbai. Hot on its heels and ranked eleventh globally is India’s National Stock Exchange (NSE).
Established in 1992, it’s much younger than the BSE and has far fewer companies listed (less than 2,000 on the NSE versus more than 5,000 on the BSE). However, the volumes traded on the NSE are much higher than the BSE. It tends to be the stock market preferred by traders rather than traditional investors.
Bottom line
The Bombay Stock Exchange, one of the world’s oldest and largest stock markets, provides an attractive avenue for UK investors seeking to invest in India. Particularly well-suited to traditional, long-term investors, the exchange has delivered robust growth over the past five years, with a remarkable 140% return – significantly outpacing both the US’s S&P 500 and the UK’s FTSE 100.
On the other hand, India’s National Stock Exchange may be a more appealing option for active traders and seasoned investors. It’s important to choose the platform that aligns with your investment strategy and experience level. International investing isn’t solely about stock performance. Currency fluctuations play a vital role. The Indian Rupee fell 20% against the dollar and 14% against the pound from 2018 to 2023, which could reduce your returns when converted back to pounds.
In terms of dividends, the Bombay Stock Exchange provides an average annual yield of 1.6% – modest when compared to the FTSE 100’s 3.9%. Some companies, such as Coal India and Oil and Natural Gas Corporation, offer larger dividends, but picking individual stocks comes with higher risks.
Funds that track a Bombay Stock Exchange index can offer a safer, more straightforward investment method. Yet, remember that investing in emerging markets like India often brings higher volatility. Any decision to invest in the Bombay Stock Exchange should carefully weigh the potential for high returns against these associated risks.
Frequently asked questions
It’s not a case of “better” or “worse” – the exchanges are simply different. The well-established Bombay Stock Exchange tends to appeal to traditional, long-term investors – including those new to investing. The National Stock Exchange attracts more seasoned investors, including day traders looking to trade in derivatives, futures and options.
The Bombay Stock Exchange is open weekdays from 9:15am to 3:30pm India Standard Time. That’s 3:45am to 10am Greenwich Mean Time (GMT).
The simplest – and probably most cost-effective – way to invest in BSE is through an ETF that tracks the performance of a BSE index, such as the BSE SENSEX. This option means you won’t own shares directly, but your returns will still reflect the performance of companies in the index. You can also buy shares in some individual companies, though only the largest may be available to buy via the LSE and other Western exchanges. You may also incur high trading fees.
In the last five years, from 2018 to 2023, the Bombay Stock Exchange has given a remarkable return of 140%. In comparison, the American S&P 500 index grew 67%, while the UK’s FTSE 100 only rose 3%.
When you invest internationally, you’re not only betting on the stocks themselves but also on the currencies.
From 2018 to 2023, the Indian Rupee fell by 20% against the US dollar and by 14% against the pound. So, if you were to sell your investment and convert the returns back to these currencies, the amount you’d receive would be lower.
This is a critical factor to remember when investing abroad: Your returns can be significantly influenced by the strength or weakness of the foreign currency against your own. This effect, combined with the actual performance of your investments, determines your ultimate gains.
The Bombay Stock Exchange gives a yearly dividend – essentially a little bonus payment – of 1.6%. That’s higher than the S&P 500’s 1.5%, but much lower than the FTSE 100’s generous 3.9%. Keep in mind that 1.6% is the average dividend paid by all the companies listed on the Bombay Stock Exchange.
If you want to get into picking individual companies, you can select those paying the biggest dividends. For example, Coal India pays a juicy 10.5% while Oil and Natural Gas Corporation pays 6.5%.
Just remember that selecting individual companies, while potentially more lucrative, leaves you at risk of losing everything if the firm goes bankrupt. That kind of risk is reduced almost to zero when you buy shares in a fund tracking lots of companies.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Tom Stelzer is a writer for Finder specialising in personal finance, including loans and credit, as well as small business and business loans. He has previously worked as a freelance writer covering entertainment, culture and football for publications like FourFourTwo and Man of Many. He has a Master of Media Arts and Production and Bachelor of Communications in Journalism from the University of Technology Sydney.
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