First Step to Trading in Stock Market India

As per the priority, demat account is an abbreviated term for Dematerialized account, which is also known as depository or DP account. This account is used for store the securities electronically in place of holding it in physical form. The functioning of Demat account very much similar to the functioning of bank account. For example, savings bank account is typically used for depositing as well as withdrawing money, and in the same manner, demat account is utilized for withdrawing as well as depositing bonds, NSCs, stocks and debentures.

There is no need of possessing some sort of physical certificate for the shares you hold because demat account stores these in electronic form. On top of it, almost all sorts of buying & selling of stocks are adjustable in this very account. The depository participant (DP), with whom you have an account, will provide you your holdings & transactions statements periodically that are very much like a bank statement or passbook.

Although emergence of Demat accounts is relatively recent in India, around 2% of the country’s population have already opened demat accounts by now. However, remaining of the population is still content with holding physical evidence of the securities.

In order to trade in the stock exchanges of India, the two primary things you require is demat account and an amount of money you can trade with. You should open demat account as it has many advantages attached to it. Few of such advantages include easy and quick purchase and sale of any company’s online subscription to Initial Public Offer (IPO), shares and stocks on BSE & NSE, online Futures & Options trading, gold investment by investing into gold etfs, online investment in mutual funds, and investing in Liquid BeEs.

Apart from that, demat account is supposed to be linked with one of your bank accounts that will be used for facilitating various monetary transactions. This way, all redemption proceeds will also be credited to your account automatically. Additionally, Demat account can be beneficial in various other ways. For example, if a demat account holder has to communicate residence change, all he/she needs to do is to intimate the DP in writing. The new address will be sent to all those companies, in which he or she has invested, by that DP only.

In case some specific debentures have to be redeemed or some shares have to be sold, you can easily transfer it without any requirement of incurring additional costs or having extra paper work. This is typically done by signing a DIS (Delivery Instruction Slip), which functions like a bank chequebook.

Furthermore, maintenance of demat account allows preservation of securities in a secure and safe manner. This is possible because holding physical bond and share certificates exposes it to the chances getting lost due to mutilation, theft etc. Thus, opening demat account will help you in getting rid of most of the drawbacks of physical possession.