A Demat account opening is not compulsory in India. But it is crucial and mandatory to have a Demat account in order to buy and sell shares. To begin with, without a Demat account, no individual can purchase and sell shares through its recognised stock exchanges. It is, thus, compulsory to buy and sell shares in its dematerialised form, only, in India.
Today, having physical forms of share certificates to trade is not valid anymore. Investors are now required to make their purchases and sales from stock exchanges online through a Demat account. In addition, if you are looking to make purchases in an Initial Public Offering (IPO), you need a Demat and trading account linked to your bank account.
The Securities and Exchange Board of India (SEBI) mandates that all public issues have to be made via the Demat mode.
Since the inception of the Internet, a good deal of documentation has moved online. Over time, thanks to incredible advancement in online technology, the movement of shares and securities too have moved in the online domain.
Here we look into what is a Demat account and how it can allow you to hold and manage your shares and securities online. After the Depositories Act, 1996, came into effect, the handling of all securities and shares has become significantly easy and hassle-free due to Demat accounts. Thus, SEBI has mandated that every investor in India must have a Demat account if they are to invest their money in the stock market.
Today, opening a Demat account is as effortless as filling an online form or making a phone call. You can open a Demat account through a reputed online broker such as Kotak Securities and provide the necessary details needed to open the account. You can purchase all kinds of shares, debentures, ETF’s, IPOs, mutual funds, sovereign bonds and more through a Demat account. However, if you are looking to purchase mutual funds, you can do so without having a Demat account.
Having a Demat account has numerous benefits and offers various features. These include:
- Ease in transacting and managing multiple securities in a single account. You can manage your entire portfolio through a separate Demat account thus making it easy and effortless to buy and sell shares.
- Through the online process, you can conveniently and quickly process your transactions in a matter of minutes. You can invest in company shares without having to visit the company in any remote location or the comfort of your home. You will receive your shares in your Demat account in less than two business days.
- Through a Demat account, there is no restriction on the quantity and number of securities you can hold. In the past, one had to be involved in odd lot shares if the number of transactions was below a specified amount. Today, you can easily transact with any number of shares and even as low as one share or security.
- A Demat account has done away with physical papers certificates and cumbersome documentation. It has reduced manual paperwork and increased security.
Approach a broking form to open a Demat and trading account. You may want to consider the various fees, before deciding on the right broker or agent to open a Demat account.
