If you want to invest in stock markets, then the first step is to open a demat account and a trading account. Having both the accounts will allow you to trade with ease in stocks and securities. Before embarking on your journey for investment in stock markets, always remember to have a thorough understanding of the market fundamentals. Opening a demat account and online trading account with a reputed stockbroker will allow you seamless trading across various segments through cutting-edge trading platforms.
Understanding a demat account:
- A demat account holds your shares and securities in the electronic format. It eliminates the risks associated with holding your shares physically and allows you to trade in a hassle-free manner. A demat account can hold a wide slew of investments, like shares, bonds, debt securities, government bonds, Exchange-Traded Funds (ETFs), mutual funds etc.
- A demat account is similar to a bank account. For instance, if you purchase equity shares of a particular company, these will be credited in your demat account. Conversely, if you sell the shares, these will be accordingly debited from your account.
- Demat accounts in India are maintained by National Securities Depository Limited (NSDL) and Central Depositories Services Limited (CDSL). Stock broking firms, registered with either of the depositories, are known as Depository Participants (DPs).
Types of Demat accounts: There are three types of demat accounts in India:
- Ordinary/Regular demat account: These are held by residents of India for trading across stock exchanges.
- Repatriable demat accounts: Non-Resident Indians (NRIs) can open this account to transfer their funds to their countries of residence. This account has to be compulsorily linked with a Non-resident External (NRE) account for repatriation of funds.
- Non-repatriable demat account: This is an account for those NRIs who do not want to transfer their funds. This account has to be linked with a Non-resident Ordinary (NRO) bank account.
Benefits of demat account: A demat account offers the following benefits:
- Streamlined trading process
- Elimination of cumbersome paperwork
- Zero/minimal risks involved
- Swift transactions
- Hassle-free communication
- Increased transparency
How to open a demat account?
You can open a demat account in a few simple steps:
- Step 1: Fill and submit the demat account opening form along with the requisite documents
- Step 2: The depository participant (DP) will then complete the verification process
- Step 3: The DP will then activate your account
Now that you have successfully opened a demat account, you are also required to have a trading account. You can place your orders for purchase and sales of shares and securities only through an online trading account.
Understanding a trading account:
- Before you start trading in stock markets, you are mandatorily required to open an online trading account and link it with your demat account. While a demat account merely holds your stocks and securities, an online trading account allows you to actually trade in them.
- An online trading account can only be opened with a registered stock broker. The stock broker acts as an intermediary between you and the stock exchange. Every trading account is provided with a unique user ID and password.
Benefits of trading account: An online trading account can provide you with manifold advantages, like:
- Provides access to multiple stock exchanges: With an online trading account, you can trade with ease, on a single platform, across multiple stock exchanges, like Bombay Stock Exchange (BSE), National Stock Exchange (NSE), National Commodity & Derivatives Exchange Limited (NCDEX), Multi Commodity Exchange of India Ltd (MCX) etc.
- Convenience and ease of trading: An online trading account provides you with tremendous ease, where you can engage in trading through multiple devices, including smartphones. You can access stock markets from anywhere, while on the go.
- Security of transactions: All your transactions are secured by multiple levels of digital security.
- Seamless transactions: An online trading account allows you to trade in a smooth and hassle-free manner. Any transaction, including transfer of funds, placing orders, monitoring of portfolio and taking deliveries, can be processed within minutes, thus allowing for a smooth trading experience.
- Harness the power of cutting-edge technologies: An online trading platform is powered by state-of-the-art technologies, thus providing for blazing fast speed and technology-driven trading.
How to open an online trading account?
Just like a demat account, you can open an online trading account within minutes:
- Step 1: Visit the stock broker’s website and select the option to open a trading account.
- Step 2: You will have to submit the OTPs, following which you will be provided with a trading account opening form.
- Step 3: Submit the requisite documents
- Step 4: Once the documentation is complete and the stockbroker receives your signed forms, your online demat account will be activated within 24 hours.
Conclusion: Thus, you need to open a demat account and an online trading account for trading in shares and securities across stock exchanges. You must, however, remember to open the twin accounts with a stockbroker of repute. Look for features, like minimal trading account opening charges, zero AMC and the option of a flat brokerage plan. A trusted stockbroker can provide you access to financial and research reports, which will enable you to make wise investment decisions. Besides, look for trading platforms equipped with cutting-edge technology. Always chose to open an online trading account and a demat account with a stockbroker who has a track record of reliable customer support.
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius