Opening a demat account
Opening a demat account is simple and easy. You can open a demat account with any one of the three Central Depositories in India, namely, NSDL (National Securities Depository Limited), CDSL (Central Depository Services Limited), or NCDEX-SPOT (National Commodity and Derivatives Exchange). The process of opening a demat account is almost similar to opening a bank account.
To open a demat account, you need to fill up an application form and submit it along with KYC (Know Your Customer) documents such as identity proof and address proof. Once your application is approved, you will be given a user ID and password which can be used to log in to your account.
Buying and selling shares
You can buy and sell shares using your demat account. When you buy shares, they are credited to your demat account on the settlement date. Similarly, when you sell shares, they are debited from your demat account on the settlement date.
There are two types of settlements in India – T+2 and T+0. Under T+2 settlement, the transaction is completed two days after the trade date. For example, if you buy shares on Monday, the transaction will be completed on Wednesday i.e., two days later. However, under T+0 settlement, the transaction is completed on the same day i.e., the trade date itself.
For buying and selling shares using your demat account, you need to have a trading account that is linked to your demat account. You can place an order for buying or selling shares through your trading platform which will get executed on the stock exchange where that particular share is listed.
Using a demat account for transactions
Once you have opened a Demat Account and linked it to your Trading Account, there are various ways in which you can use it for transactions:
1. a) Off-market transactions:
These are transactions between two investors which take place outside the stock exchange platform through their respective brokerage firms. An example of an off-market transaction would be if Investor A wants to sell 1000 Reliance Industries Ltd (RIL) shares to Investor B at Rs 1400 per share while RIL’s current market price is Rs 1310 per share. In this case, both parties would benefit since Investor A would receive more than the prevailing market price while Investor B would pay less than what he/she would have had to shell out if he/she bought these RIL shares from the stock exchange. b) Pledge or hypothecation: Pledging or hypothecation of securities refers to availing loans by offering securities as collateral. In other words, if you pledged 100 XYZ Ltd shares with Bank ABC as collateral, you could avail of a loan from Bank ABC. The loan amount that you could avail would depend on various factors such as margin requirements set by Bank ABC, the value of XYZ Ltd shares, etc . c) Transfer of securities: You can also use your Demat Account to transfer securities from one Demat Account to another. For instance, suppose Investor A wants to give his/her son Investor B some XYZ Ltd Shares that he/she holds in his/her Demat Account as a birthday present. In order to carry out this transfer, all Investor A needs do is instruct his/her DP about this request following which these securities would get transferred from Investor A’s Dematerialized Holdings into Investor B’s Holdings d) Availing IPOs(Initial Public Offerings): Applying for IPOs has now become much easier with people being able to apply for them online directly through their Dematerialized Holdings Accounts without having to go through paper applications forms. All one needs do is log into his/her DP’s website/portal using a unique user id & password provided by him/her at the time of opening DH & follow the instructions provided therein
Conclusion
A demat account is a must for anyone looking to invest in shares or mutual funds. It offers several benefits, such as convenience, safety and security of your investments, and easy transfer of funds. If you’re not using your demat account to its full potential, you’re missing out on some great demat account benefits.
To make the most of your demat account, be sure to open an account with a reputable broker. Once you have an account, you can start buying and selling shares or SIP Calculator. You can also use your demat account for transactions, such as transferring funds between accounts or paying bills.
By taking advantage of all that a demat account has to offer, you can make the most of your investment portfolio. So don’t wait any longer – open a demat account today and start reaping the benefits!