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AxisDirect-O-Nomics
Jun 15, 2018 | Source: scripbox.com
Do you have a bank account? Mostly, you’d say yes- maybe you even hold multiple bank accounts.
A Demat account is something like a bank account. Only thing is, instead of money held in your bank account, Demat holds your securities - a form of shares, bonds, or debentures.
If you wish to buy securities in the stock market, you first need a Demat account. Here’s everything you need to know about opening a Demat account.
What is a Demat account and when do you need it?
A Dematerialized or Demat account is an electronic account where your securities are held, serving as an alternative to physical certificates.
In order to buy and sell securities in the Indian stock market, it is necessary for you, as an investor, to open a Demat account with a Depository Participant (DP).
What are depositories and depository participants (DPs)?
Depositories are organizations that hold your securities electronically and also facilitate transacting. The two depositories registered with SEBI are National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
Depository Participants (DP) act as agents between depositories and investors. In order to avail the services of a depository, you need to go through a DP. The account you need to have with a DP is referred to as a Demat account.
What are the benefits of a Demat account?
• Your shares and securities are securely held
• The transaction cost is significantly lesser compared to the physical segment since you don't have to pay stamp duty
• Convenient and fast for electronic settlements
• Reduced paperwork in case of transfer of securities
• Risks associated with physical certificates, such as thefts, non delivery, and fake certificates, are eliminated
• Sell any number of shares you want- even one
• Invest online
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