Now, why do such differences exist? “The price difference exists primarily due to the fact that there is no cross clearing between the two exchanges, as is the norm in other countries,” says Raghu Kumar, Co-founder of brokerage firm RKSV. “So, one cannot do arbitrage trades by buying a stock on the BSE and selling the same at a higher price on the NSE and earning a profit from the price difference. The two scrips are basically ‘independent’ from each other. So to do arbitrage one would have to hold shares overnight.”

Raghu Kumar

Raghu Kumar

Raghu loves trading, algorithms, and figuring out ways to beat the market. He enjoys workouts, naps, food, listening to Carnatic music, teaching his dogs (pug named Zenzi and Shih Tzu named Cactus) cool tricks, and spending time with family and friends.A list of his authored articles on NDTV Profit can be found at http://profit.ndtv.com/topic/rksv