OPEN A DEMAT ACCOUNT
Before 1996 in India, shares were bought, stored, and sold in their paper format as share certificates. The National Securities Depository Limited was set up and digitized share trading. Shares were traded in their electronic format, also known as dematerialized shares. Here is where demat account got introduced. A demat account enables investors to buy and store equity investments in their electronic dematerialized format.
The Securities and Exchange Board of India (SEBI) has made it imperative to open a demat account for any investor who wishes to trade and invest in equity-related investments. Digitization has led to the further diversification of investment options, and a demat account can also be used to store government securities, bonds, mutual funds, and Exchange Traded Funds (ETF).
A demat account is like a bank account. Money is held in an electronic format in a bank account, and electronic entries are made in the bank passbook. Similarly, shares and other equity-investments are held in their dematerialized form in a demat account, and the credit (buying of securities) and debit (selling of securities) is reflected accordingly in the Statement of Accounts. It is not compulsory to have any balance of shares while opening a demat account. You maintain Zero balance in a demat account.
Investing in shares is streamlined and safe with a demat account. Dematerialization of the shares enhances their ease of handling and accessibility.
TYPES OF DEMAT ACCOUNTS -
1.Regular Demat Account – This account is only for the residents of India who wish to trade in online Equity investments.
2.Repatriable Demat Account – This account is for Non-Resident Indians to trade in the global market. The NRI needs to open an NRE bank account to facilitate the transfer of funds abroad.
3.Non- repatriable Demat Account –This account is for an NRI to trade in online securities without transferring funds abroad. This demat account needs an NRO bank account linked to it.
BENEFITS OF HAVING A DEMAT ACCOUNT -
1.Shares certificates in their paper format carried risks of loss, damage, etc. Demat account allows investors to hold shares in their electronic form and thus eliminates the risk of loss and damage of securities, also reducing the incidences of forgery and theft of paper securities.
2.A demat account allows investors to easily access their investments, transaction history, statement of holdings at the click of a button.
3.Demat account eliminates the requirement of sending paper certificates to the Company or RTA for transfer, thus reducing costs, delays, and loss of documents. Demat accounts ensure a seamless buying, selling, and storage of shares online.
4.Demat account and online trading have eliminated the applicable stamp duty on transfer of shares. It has also removed other transactional costs.
5.Demat account ensures quick trade in equity investments with intra-day trading through online platforms. Investors personal details linked to every company stock and share can be changed through a single demat account, thus reducing the time taken to trade and manage securities.
6.Demat account has eliminated the restrictions on the selling of shares. It allows investors to sell shares even in odd lots.
7.A demat account, along with shares and stocks, also allows buying and storing of government securities, bonds, mutual funds, Exchange Traded Funds, etc.
HOW TO OPEN A DEMAT ACCOUNT?
1.Documents Required - Like opening a bank account, demat account opening requires a certain set of documents. Although these documents vary with different types of account. Following are some of the documents needed to open a demat account –
a.It is compulsory for an investor to have a PAN card for opening a demat account.
b.An account opening form asks for the personal details and requires signatures of all the authorized holders of the demat account.
c.Passport size photographs of all the account holders for the account opening form.
d.Applicants must submit either Aadhar card, Voter ID, Passport or Driving License as Proof of Identity (PoI). Other government authorized identity proofs are also acceptable.
e.Either Passport, Voter ID, Driving License, Ration Card, Registered Lease/ Sale agreement of residence, Utility Bills (Electricity, Gas or Landline) or Bank account statement/passbook as Proof of Address (PoA).
f.It is imperative to submit an investor's proof of income or net worth if they want to invest in the commodities market or the derivatives. The appropriate documents are Form 16, IT acknowledgment, bank account statement for six months or a certificate provided by a verified CA that confirms the net worth.
g.A canceled cheque that bears bank account details like the investor's name, account number, IFSC Code, MICR Code, and bank and branch details is also required.
h.It is compulsory for NRI investors to appoint another person as a Power of Attorney to transact on their behalf.
2.The investor must approach a Depository Participant who is registered to open a Demat account and is linked to any one of the two Central Depositories – NSDL or CDSL. The DP verifies the documents and opens a Demat Accounts for the investor, which is linked to either the NSDL or CDSL.
3.The investor will be provided with the Demat Account number. This account number is a combination of the DP ID + investor's unique Client ID.
4.As the Investment broker, the DP will buy and sell the demat shares on the advice and request of the investor and hold these shares in the Demat Account. If an online trading account is linked to the Demat account, the shares can be bought and sold online.
5.The shares stored in the Demat account can be viewed through the Statement of Account.
Before 1996, securities investment was a lengthy and time-consuming procedure with cumbersome paperwork. Managing the paper securities was a hassle and very costly. Dematerialization of shares and availability of demat accounts has made trading in securities streamlined, seamless, and accessible for traders wanting to trade in a multitude of investment products.
A demat account offers a safe platform to trade in equity-related investments. Investing in equity is a highly profitable venture and thus attracts many investors. Not everyone is educated or trained in the intricate workings of the equity market and the demat account system. However, understanding your objectives and requirements and finding a service provider well suited to your need is essential. The DPs give the necessary knowledge, support to the investors, and help them realize their investment objectives.
WHAT IS A DEMAT ACCOUNT?
Due to the execution of various schemes for "Inclusive Banking," banks have now penetrated close to 99% of homes in India. Banks now provide all the necessary facilities, and everyone from the rural, illiterate population to the urban elite use banking facilities. As a result, most of us now know how a bank functions concerning our money. The way a bank is for your money, a demat account is for your electronic securities.
Before 1996, shares were traded and stored in a paper format called share certificates in India. The National Securities Depositories Limited was set up in 1996, and it became a central depository for the electronic format of shares. Share trading became online, and all the shares were traded in dematerialized form.
With the diversification of investment options, the dematerialized securities can be mutual funds, bonds, government securities, Exchange Traded Funds (ETF), etc. Demat account helps you to store all these types of securities in their electronic format.
WHY DO YOU NEED A DEMAT ACCOUNT?
In India, the Securities and Exchange Board of India is the top-most Authority for the regulation of share trading. It lays down that opening a Demat account is requisite if you want to buy and store shares in their dematerialized format.
Having a demat account ensures that the investor has a safe environment to trade in equity-related investments. Before 1996, share trading was a tedious and lengthy process with colossal paperwork. Managing the paper-based securities was a tiresome and costly affair. Dematerialization and the regulation of the electronic trading by both SEBI and the central depositories have made share trading seamless and accessible for every investor. The conversion of share certificates to electronic formats increases their ease of handling and accessibility.
A demat account has to be opened with a Depository Participant registered with either of the two central depositories in India. The two depositories are –
The National Securities Depository Limited (NSDL) promoted by the National Stock Exchange (NSE)
The Central Depositories Services Limited (CDSL) promoted by the Bombay Stock Exchange (BSE)
The DP needs to be authorized by the SEBI and should follow all the necessary regulations.
When you find the depository suitable for you, collect and submit duly filled and signed account opening form with all the requisite documents. After verifying the documents, the DP will open your account linked to either the NSDL or CDSL. You will be provided the copy of the agreement, schedule of charges, demat account number, and unique client ID. An online trading platform is also required to trade in shares online. The DP will provide the login credentials of these platforms.
The Depository Participant will purchase the electronic or dematerialized shares for you and maintain them in your Demat account. You can view them in the Statement of Holdings.
When the listed companies give out dividends or bonus, they get a list of their shareholders from the NSDL or the CDSL and thus credit the investor accounts.
WHAT ARE THE BENEFITS OF A DEMAT ACCOUNT?
1)LOWER RISK– Before 1996, possessing shares as paper certificates came with a lot of problems. The risks included loss of certificates, damage to the certificates, or misplacing them. The paper certificates also caused high incidences of theft and forgery. Dematerialization of shares eliminates all these threats and makes share trading a safer experience.
2)EASY TO HOLD – Having a demat account makes shares and their trading accessible. Investors can now easily trade in securities, view their transaction history, analyze their holdings, etc., at the click of a button. It also makes management and changing any personal details linked to the demat account easier. It is easy now to change the linked address, linked phone number, linked bank details, and any such account-related changes for every company stock from the comfort of one single demat account.
3)EASE OF TRADING – In case of paper share certificates, they have to be sent to the issuing company or the Registrar and Transfer Authority to get the ownership of shares transferred. This entailed a very costly procedure with delays and loss of certificates. With a demat account, you can transfer shares at the click of a button. Demat account has made share trading a seamless, streamlined, and cost-effective process.
4)REDUCED COSTS – If an investor wished to transfer physical share certificates, they had to pay stamp duty, making it a very cumbersome and costly procedure. Dematerialization of shares has ensured a smooth transfer of shares online, thus eliminating stamp duty and reduced other applicable transaction costs.
5)REDUCED TIME – Trading in shares through a demat account considerably reduces the time taken for buying and selling of stocks. Introduction of demat account and dematerialization of shares have introduced intra-day trading on online trading platforms. Investors can also change their registered personal details in all the stocks through the single point of a demat account. This has reduced the time taken to trade in securities and manage the portfolio.
6)ODD-LOT PROBLEM RESOLVED – Before the advent of demat accounts, there were various restrictions on the selling of shares. Traders could not sell their shares in odd-lots, which caused a lot of problems. However, trading through a demat account has eliminated all these restrictions. Shareholders can now sell their shares in any number with the click of a button from the comfort of their online accounts.
7)VARIETY OF INVESTMENTS – The investment options have diversified over the years and include options like mutual funds, government bonds, government securities, Exchange Traded Funds, etc. A demat account allows you to store all the different types of investments in their electronic format.
A demat account enables an investor to opt for a safe platform to trade in equities and diversify his investment portfolio. The Depository participants provide the requisite knowledge and support to these investors so that they can make a well-informed decision regarding their investment. The DPs help investors recognizing their investments goals and objectives, and find the perfect portfolio with the right mix of holdings. The central depositories, NSDL and CDSL, ensure a comprehensive database and records of all the investors in the country.
A one-stop-shop for all your market trading needs, Sharekhan is your final destination for online trading. With 19 years of experience; 1.9 million customers; 575 cities covered; 3,200 outlets; 46,600 crore customer assets, Sharekhan has helped investors learn, analyze, and trade profitably in stock market investments.
Let us have a look at all the facilities provided by Sharekhan to its customers.
1) FIRST-STEP PROGRAMME
The First-Step Programme is for new investors wishing to invest in the market, but are confused by the terminologies and processes. First-Step is a unique program by Sharekhan that teaches investors the basics of the stock market, helps them to understand and use the research platforms, and trade in markets online.
The First-Step lists four steps to a first online trade –
Learn about the First-Step program.
Open a demat account with Sharekhan. The customer care representatives will guide you with everything.
Execute your first with the guidance and help of Sharekhan’s representative.
Once you get the hang of it, you can access market research on the Sharekhan portals, and execute your trades on your own.
2) INVESTOR CLASSIC PROGRAMME
Sharekhan, with its Investor Classic program, provides a seamless platform to manage your investment with the click of a button. Investors can access live stock prices and make online cash transfer against purchases. Enrolling for Investor Classic eliminates tedious paperwork with instant order execution.
Sharekhan has appointed Friendly customer service representatives who are accessible for toll-free phone calls, emails and even live online chats.
Investors interested in daily intra-day targets to long-term goals will get proven research analysis with timely advice for well-defined profit targets. There is live analysis before, during, and aftermarket trading timings. Investors will also get a pick from the Top Pick companies of Sharekhan’s research basket.
3) ACTIVE TRADER TRADE TIGER
The Trade Tiger feature of Sharekhan is an advantage for expert and experienced investors to help them trade like a pro by allowing them the following facilities –
24-hour market access
Activated online fund transfer with multiple banks.
FAST access key for quick access to order reports and placements.
International market research
Live Streaming Quotes
Single trading screen for all segments like BSE, NSE, NCDEX, MCX, IPOs, Mutual Funds, etc.
Advanced charting, including Tick-by-tick intra-day and end of day charts powered by in-depth analysis.
Access all trading calls
An investor can save the layout of his designated screen and graph templates for future use.
Users can set their alerts on the input Stock Price trigger.
Many tools are available to understand and analyze the market – Ticker, Span Calculator, Tick Query, Market Summary, Option Premium Calculator, etc.
4) HNI ADVISORY
Investors with more than Rs. 5,00,000/- as investment corpus will have an exclusively designed personalized investment advice. The stock market expertise will be provided by a dedicated team of Relationship Managers who will act as a one-point interaction. The High Net Investors will have RMs in constant touch providing regular advice, updates, and reports.
There will be a Portfolio Doctor assigned to HNI portfolios to analyze the existing portfolio, Re-align the holdings as per expert analysis, and thus create a Model portfolio in line with the current market trends and investor goals.
5) COMPREHENSIVE PORTFOLIO MANAGEMENT SERVICES
Sharekhan provides comprehensive Portfolio Management Services, which are exclusive and specialized services for HNI Investors. The portfolios of HNI investors are curated and managed by a team of experts – statisticians, strategists, analysts, and specialists. The Portfolio managers calculate the risk tolerance of the client and create a balanced portfolio while maximizing the risk-adjusted returns. This has been developed under a dedicated team with a disciplined approach and calculated risk controls.
Portfolio Management Services has two key products –
i.Fundamental Investment – products that invest in assets with strong fundamental research.The Fundamental Investment Portfolios are further divided into five types –
Power Portfolio – Large Cap Oriented
Prime Picks – Growth-based multi-baggers (Alpha portfolio)
Sharp – dedicated positions in a handful stock irrespective of the market capitalization of the company.
Diversified Equity Portfolio – well research quality companies to outperform benchmark indices.
Wealth Optimizer – Undervalued growth stocks with automated decision making for fundamental analysis.
ii.Technical Analysis – investments in derivatives (F&O) with the help of proprietary trading tools or any model sub-portfolios.There are two types of portfolios under Technical Analysis -
Index Future –going long or going short on Nifty futures
Trailing Stops – going long or going short on stock futures with a monthly payment of any returns.
6) IN-DEPTH RESEARCH AND ANALYSIS
While investing with Sharekhan, you can relish in the right mix of research and reliability. The various portals of Sharekhan have in-depth research materials for different types of investors. Go to the "Research" tab on the home page, and you will find
Research material for traders and investors
Detailed research reports
Dedicated research for mutual fund
Latest calls for traders and investors
Specialized analysis for commodity traders
The Opportunity of the Day
7) INVESTOR EDUCATION – LEARN BEFORE YOU INVEST
Sharekhan is your ultimate guide in the jungle of financial jargons and technicalities. To enhance investor learning and market trading in India, Sharekhan, in collaboration with the Online Trading Academy, has taken the initiative to provide world-class financial education.
Online Trading Academy, started in 1997, was one of the largest trading floors in the USA. They decided to shift focus to investor education and has currently grown to 38 locations worldwide with over 2,00,000 individuals coached.
Sharekhan provides trader and investor education for specific needs and experience levels. The courses are for beginners as well as expert investors and traders belonging to every asset-class. There is short-term, intermediate, and long-term professional instruction available for –
Short Term Trading
Mutual Funds Investment
Investment in F&O and currencies
8) ADDITIONAL SHAREKHAN SERVICES
Apart from core services for investment and trading in the markets, Sharekhan provides additional services like –
Loan Against Securities
Whatsapp delivered research
9) SHAREKHAN PLATFORMS
Sharekhan services are accessible over multiple platforms allowing you the flexibility to manage your investments from the comfort of your home. Some of the platforms of Sharekhan are as follows –
Trade Terminals at ShareShops
Sharekhan Dial-n-Trade: Phone-based Advice and Orders
Sharekhan Mini: trade with low internet connectivity
Sharekhan Trade Tiger: advanced online desktop trading platform
Whether you are new to the stock market trading, flummoxed by the jargon flying around or an expert investor looking for a trading partner with years of experience and well-researched analysis; Sharekhan is the answer of all your needs. Open a demat and trading account with Sharekhan and pay Annual Maintenance Charges that are entirely adjustable against your brokerage enabling you to save around 70% of your brokerage.
FREQUENTLY ASKED QUESTIONS
Opening a demat account with any Depository Participant entails submission of a number of documents. The list of documents is different for different types of account - Individual, Joint demat accounts, Corporate demat accounts, and NRI demat accounts.
Demat account converts your stocks and other equity-related investments into electronic format. Apart from complying with SEBI guidelines, opening a demat account offers you multiple benefits like lower risks in investing, ease of holding the shares, resolution of odd-lot problems, reduction in costs involved in share trading, and reduction in time required for buying and selling the shares.
A demat account enables an investor to opt for a safe platform to trade in electronic form of equities and diversify his investment portfolio. The Depository participants open demat accounts for investors, and help them buy and store shares in the account. The DPs also provide the requisite knowledge and support to these investors so that they can make a well-informed decision regarding their investment.
A demat account allows you to hold the securities in their electronic format and thus, makes investing in stocks a safe and streamlined experience. A demat account can be opened with a Depository Participant by submitting a duly filled application and the required KYC documents. Once the account is opened by the DP you can start trading in electronic securities, either directly via the linked trading account or provide a cheque to the DP to buy the shares for you. The DP will provide you valid research and analysis so that you can select the right holdings for your investment portfolio. You will have to pay an Annual charge to the DP for the services rendered. You can open a demat account with a depository participant registered with the Central Depositories and authorized by the SEBI. The DP will open your account and provide you with a unique account number. It will also help you with finding the perfect holdings and to manage your portfolio.
Demat Accounts make it easier and safe, Demat accounts make share trading an easy and safe experience, but it also requires investors to follow the rules and guidelines. A comprehensive checklist of all the necessary requirements to check before opening a demat account – documents, broker verification, brokerage, AMC, etc., can help the investors have a hassle-free experience.
Investing in shares and choosing a stock requires detailed research and analysis before putting in your hard earned money into the market. This can get a little tricky and overwhelming for first-time new investors. Even amateur investors can research a stock, invest in a good stock and earn high returns if they know how to identify the patterns. Once they delve deeper into share trading they can choose between trading or investing, and learn different types of orders and concepts like short-selling.
Opening a demat account and trading account is the basic step towards investing in equity investments online. There are different types of trading and demat accounts that serve the objectives of varying types of investors. Each of these accounts - repatriable or non-repatriable demat accounts, equity or commodity trading account, online or offline trading account, have their distinct characteristics, advantages, and limitations, based on the purpose for which they are opened.
Bonus shares are additional shares given to shareholders by the company at no additional cost. An issue of bonus shares is dependent on the eligibility of the investor. Also, there are innumerous guidelines and tax implications of a bonus issue.
Prior to 1996 in India, shares were bought, stored and sold as share certificates. Demat accounts need to be opened now if an investor wants to transact in online shares. The conversion from paper shares to electronic shares is dematerialization, while converting them back to paper certificates is called rematerialization.
The Demat Account Number is one of the important aspects of the demat account framework. It is provided to the investor once the demat account is opened with the Depository Participant. The Unique ID helps the Depository Participant to identify and manage unique clients and their portfolios easily.
Demat account converts your stocks and other equity-related investments into electronic format. To ensure that you have a streamlined equity investment through your demat account it is imperative that you understand various concepts and procedures related to demat account operation. Knowledge about depository concepts, dematerialization, procedure for dematerialization, rematerialization, freezing/de-freezing, closure, and transfer closure cum waiver (TCW) will help you to operate your demat account seamlessly.
A Demat account can be opened by different types of investors, like an individual investor, joint investors, corporate and NRIs. It can also be opened in the name of a minor. There is a separate procedure, along with a comprehensive list of documents, laid down for opening a minor account. A minor demat account has multiple restrictions for online trading; however it can be converted to a regular demat account when the account holder turns major.
In 2002, the Reserve Bank of India laid down the Know Your Customer (KYC). The Securities and Exchange Board of India (SEBI), the regulatory body for demat trading in India has adopted the KYC norms for all equity-related investments and online trading including the opening of demat account, trading account, etc. The primary aim of Know Your Customer (KYC) is to ensure verification of investor credentials, and, thus, eliminate fraud, corruption, money laundering, terror financing, etc.
Before 1996 in India, shares were bought, stored, and sold in their paper format as share certificates. The National Securities Depository Limited was set up in 1996 and it digitized share trading. Shares were traded in their electronic or dematerialized format, and demat accounts enabled investors to buy and store the dematerialized shares. A demat account is compulsory to invest in equity-related investments like shares, government bonds, ETFs, mutual funds, etc.
A one-stop-shop for all your market trading needs, Sharekhan is your final destination for online trading. With 19 years of experience; 1.9 million customers; 575 cities covered; 3,200 outlets; 46,600 crore customer assets, Sharekhan has helped investors learn, analyze, and trade profitably in stock market investments. Whether you are a confused newbie or an established investor, Sharekhan will be the perfect partner to guide you through the alleys of equity investments.
Share trading became online in India after1996, and paper shares were replaced by electronic form of shares. The Securities and Exchange Board of India laid down that investors who wish to invest in dematerialized shares need to open a demat account. Apart from fulfilling the regulations, opening a demat account has numerous advantages like low cost of trading, low risk investment, easy access to securities, less time required for buying and selling shares online, easy settlements, etc.
Demat Account is requisite to buy and store online equity investments in India. It is legal and possible for investors to open multiple demat accounts in India with different brokers. However, as different demat accounts will have separate charges and require more time for managing, it is not advisable to open multiple demat accounts if you cannot put in the time, money and effort to maintain the accounts.
A demat account can be opened by the authorized Depository Participants who are registered with the SEBI. An investor should verify the credentials of the DP, applicable maintenance and transaction charges, list of services provided, etc. After finalizing the DP, the investor will have to submit a duly filled account opening form along with the requisite KYC documents and applicable signatures. Once the representative of the DP conducts and verifies the submitted documents and credentials, the demat account will be opened, and the investor will be provided with a Unique account number.
A trading account allows you to transact in equity investments, while a demat account lets you store the purchased securities. The stock trading involves transfer of money from the bank account to the trading account and vice versa. Money can be transferred to your trading account, for the purchase of shares and to fulfil the AMC charges, through various payment methods like offline transfers (cheques or DD), netbanking (NEFT, RTGS, IMPS), debit cards, payment wallets, etc. For transferring amount back to the bank account, you will either be provided with a manual facility in the trading account interface or you can contact your broker to initiate the transfer.
The high returns, ease of trading, and the security of transactions offered by online stock trading has attracted a large number of people to invest in stocks online. However, stock investments are fraught with lot of confusions, and can get overwhelming for an amateur investor. When you buy your first stock you need to follow few steps like learning to research and analyze stocks, reading different financial newspapers, articles or journals for research of stocks, investing in stocks of companies you are familiar with, starting with small values, and most importantly, chalking out your investment goals beforehand.
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