Demat Account Opening

Demat Account Opening Is also become very easy with any Stock Broker 

Dematerialised accounted abbreviated as Demat account is nothing but a repository of digital copies of the stocks you hold.

It can be efficiently stored and managed electronically by investors with an aim of keeping it all safe and secure, so that users can conveniently trade.

What is Demat Account and how it can be opened?

It is similar to a bank account – just that a bank account holds cash whereas a demat account holds shares and securities. In 1996, demat account system was introduced in India for NSE traders and since then life has been simpler.

Else it was a tedious task to trade shares that involved a lot of paperwork to buy or sell stocks and procure physical certificates. Once electronic conversion happened things became smooth and simple.

The complicated procedure of investing, trading, holding, and monitoring through demat account has now become easier, faster and cost efficient. Apart from shares, one can trade bonds, MFs, government securities or exchange traded funds. It’s a matter of few clicks now to invest in these financial instruments.

Functioning of a Demat Account Opening 

A Demat account functions in sync with two other accounts – a bank account and a trading account. Otherwise, any demat account’s role remains restricted to that of only holding of stocks, equities, shares, bonds, MFs etc.

The actual cash flow happens in the trading account, whenever any stock is purchased or sold and the account accordingly gets either debited or credited.

On the other hand the bank account which is linked to both trading and demat accounts, helps in transferring money to a trading account. Before initiating to transact on a particular stock, first login to your trading account is necessary which is also linked to the bank account.

When you want to ‘buy’ or ‘sell’ a specific company’s stock, your request is logged into the trading account and the Depository Participant (DP) immediately forwards the request to the stock exchange along with other mandatory information.

If a ‘sell’ request is placed, then the respective stock exchange looks for a buyer who is looking to buy the same number of shares and sends an order to clearance houses to credit the particular number of shares from the buyer’s demat account and debit it to the seller’s demat account.

Benefits of a Demat Account Opening

Physical stocks or share certificates always had the risk of being either misplaced or damaged. But with digital transformation of the same into a demat account, such fear of loss or safety concern is out of question now.

It has also made trading in stock exchanges a hassle free affair, unlike pre-1996 when a lot of documentation and paperwork was involved in buying or selling a stock. Some of the benefit so a demat account are as below:

 Ease of Access – Since demat accounts are completely online, it can be easily accessed through web from anywhere in the world irrespective of time.

 Holdings portfolio – under just one demat account, you have the liberty to hold several investment instruments such as MFs, equity shares, bonds and exchange-traded funds, which can be easily opened even if you don’t possess any shares.

 Faster Monitoring – It is easy to monitor your portfolio at the comfort of home at any time of the day without even visiting your bank or stock broker. Hence it is quick and convenient.

 Time saver – With demat account being fully digital, trading in stock market has become very convenient and less time consuming. Just through few clicks one can buy, sell or transfer funds and securities in a matter of seconds.

 Cost effective – Unlike physical trading, you don’t have to shell out additional charges of stamp duty, handling fees, etc. involved when you trade with a demat account.

 Corporate Gains – demat accounts being digital, there’s automatic credit of dividends, interests or refunds without much delay. Even bonus shares, stock split or rights shares get updated automatically.

Basic Understanding of Demat Account

Some basic understanding is needed before you set out to operate the online demat account. Since, a trading account comes along a demat account linked to it, there’s unique login credentials being provided. So, use the trading account for transacting and investing in stocks.

Demat account is repository of all the purchased shares while trading account helps you in buying and selling the securities. Hence, both demat and trading accounts are equally important and necessary for online trading.

For any investor or trader to start with trading he will need a trading account, along with a demat account, and a depository Participant (DP) who connects you to a depository.

Currently, there are two depositories in India:

 National Securities Depository Ltd (NSDL)

 Central Securities Depository Ltd (CDSL)

One of the biggest utility of a demat account is that you can access beneficial information such as checking live stock market updates and analyse various forms of investments.

It also helps you to remain updated and provide share market news related to scrips where you have invested. Regular notifications are sent out by DP related to dividend declaration, results, merger and acquisition, buyback, and other info.

Analyst reports can be accessed based on company performance, financial projections, and archived information to help make informed decisions before making your investment moves.

Tracking the performance of your portfolio across different investment products is also possible which in turn helps you to take necessary actions to suit your risk profile and return expectations.

Also, as per your preference of stocks you can set alerts and automatic buy and sell orders that need to be executed when the securities reach a pre specified price.

Demat Account Opening Procedure

The process of demat account opening is spelled out here for better understanding.

 There are several financial institutions, banks, NBFCs and stock broking firms offering the service of opening demat accounts. Decide where you want to open and accordingly opt for a DP.

 Next is the tedious process of filling up the account opening form with signatures and along with copies of all the necessary documents and passport size photos, submit the form.

 For verification purpose always have the original documents ready.

 Go through the copy of the terms and conditions agreement.

 A representative from the DP will connect with you and verify the details you have furnished.

 On successful processing of the application, you will receive a demat account number along with a client ID which you can use for online access.

 Depending on the DP you choose, you will be charged with some account opening charges and annual maintenance charge apart from the transaction fee. Some DPs charge a flat fee for each transaction while others charge a percentage to the total transaction value.

 There is no limit on the minimum number of securities to keep your account active.

Documents needed for opening a Demat Account

For opening a demat account, one needs to submit identity proof, address proof and a passport size photo and an account opening form. Photocopies of the documents need to be submitted. And for verification purpose originals need to be furnished. A detailed list of valid documents that are accepted is mentioned below.

 Aadhaar Card

 Voter ID

 PAN Card

 Passport

 IT returns

 Bank Statement

 Telephone Bill

 Electricity/Gas Bill

 Any other photo ID issued by state or central government and other departments, regulatory or statutory authorities, scheduled commercial banks, PSUs, public financial institutions, or professional bodies like ICSI, ICAI, bar council, etc.

OPEN FREE DEMAT ACCOUNT