Stock market Demat account
A Dematerialized account is the full form of a Demat Account is an account that is used to hold financial securities like Equity or Debt in electronic form. Demat accounts in India are maintained by National Securities Depository Limited & Central Depository Services Limited and in which Banks work as a mediator between the Investor and the depositary in the Stock Market.
The sole purpose of opening a Demat account is to hold shares that are bought or converted into electronic shares from physical which makes share trading easy for the users during online trading.
What is dematerialization? Stock Market
When Physical shares get converted into an electronic form then it is known as the dematerialization. which you can access or maintain from anywhere in the world.
Any investor who wants to do Trading needs to open a Demat account with a Depository participant (DP). The main motive of Dematerialisation is to put an end to hold physical share certificates by investors and provide them the facility of seamless and to monitor the holdings.
Importance of a Demat account
A Demat account offers a digitally secure and commodious way of holding Securities and Shares. Which eliminates Forgery, theft, damage, and loss of physical certificates. With the help of a Demat account, one can transfer securities whenever they want to transfer. When a trade gets approved the shares are digitally transferred into your account.
India acquires a Demat account for electronic storing, In Demat account stocks and securities are shared and maintained electronically in the Stock market to eliminate the trouble faced during paper shares. Depository system was introduced by the Depository Act of 1996. Which make the purchase and transfer of shares in the stock market very easy and eliminated the risk associated with paper certification. Also, Decrease the time taken in the transfer of shares.
How does a Demat Account works?
Trading from a Demat account is a similar method as Physical Trading However, Demat accounts are electronic in nature in which one can start trading by placing an order through their Demat account. In which it is necessary to link both the Demat account and the trading accounts and when an order gets placed then the exchange process the order.
A Demat account provides the live market price of the stock in the stock market and also tells the availability of shares before the final processing of the order. Once the whole process is done then the shares get reflected in your statement of holdings.
Types of Demat accounts
There are three types of Demat accounts
- Regular Demat accounts
- Repatriable Demat accounts
- Non-repatriable Demat accounts
There are four major charges that round up on a Demat account
- Opening charges
- Annual maintenance fees
- Custodian fees
- Transaction fees
Charges for all the fees vary by DP
For opening a Demat account the documents listed below are compulsory
- Permanent account number (PAN) (compulsory)
- Bank statement (last 3 months)
- Proof of address
- Income tax return
- Two color photographs
- Bank crossed cheque
- Aadhar Card