It is widely believed that the financial markets are the most rewarding in terms of return on investment. While that statement holds true, the price movements of some volatile asset classes like stocks and derivatives contracts can reflect uncertainty. This factor is measured in terms of risk and thus, participating in trading or investing requires knowing about the intricacies of the stock market.

However, to begin the process of wealth creation, opening a Demat account is the fundamental step you need to take. Having a safe, secure, and reliable Demat account can amplify your trading experience. Since it is a primary touch-point between you and the stock market, you must understand everything about it before opening one.

In this write-up, you will find all you need to know about the Demat account that will help you confidently start your stock market journey. So without further delay, let’s get started.

What is a Demat Account?

The term ‘Demat’ Account is a short form of dematerialised account. As we have seen, it is mandatory to have this account to invest in the Indian stock market. This account can be compared with the bank accounts that we regularly use in our lives. Like we safely park our cash in the bank account, the Demat accounts store the shares that we’ve purchased.

In other words, the Demat account is a repository of our investment in stocks. At this point, you must also understand that while Demat accounts only store your shares, you also need a trading account to actualise the buying and selling activities. Normally, Demat and trading accounts are available as a bundle. However, it is not compulsory to have both of these accounts opened with the same broker.

The statutory body governing these accounts is the Securities and Exchange Board of India (SEBI). In addition to that, there are two more important parties involved in the process of providing the Demat accounts. They are:

• Depository: They provide an infrastructure that enables the storage of shares and other instruments like debentures and bonds in electronic form. It is like a huge storage facility where all the securities are kept. There are two depositories in India – (i) Central Securities Depositories Ltd (CDSL) and (ii) National Securities Depositories Ltd (NSDL).
• Depository Participants (DP): These are the banking institutions and broking houses registered with depositories. Their function is to act as an agent between the depository and the clients dealing with securities. It is the DP that offers trading and Demat account facilities in India. They aim to facilitate seamless trading and are governed by the regulator SEBI.

Now that you know the components of a Demat account, it’s time to look at how it operates. But before that, let us briefly understand the concept of dematerialisation.

What is Dematerialisation and How Does it Work?

The process by which the physical form of securities is converted into electronic format is called dematerialisation. The depository, NSDL and CDSL, hold these units of shares, debentures, bonds, etc. on behalf of the investors. 

The process of dematerialisation takes effect through the following steps.

• Physical share certificates are handed over to the broker.
• The broker requests the depository to convert shares into a dematerialised format.
• Then the DP sends such share certificates to the registrar of the respective company who then processes the conversion request.
• After verifying the certificates and the registrar converts them into electronic form and updates the account.
• Once the process is completed, shares start to reflect in your Demat account.

Types of Demat Account

Primarily there are three types of Demat accounts available in India. Let us look at each one of them briefly.

• Regular Demat Account:

If you are an Indian resident, then this account is for you. It is your best choice to trade and invest in equity and derivatives contracts. The charges and services of this account depend on whether you open it through a discount broker or a full-service broker.

• Repatriable Demat Account:

This Demat account is specially designed to allow non-resident Indians to invest in the Indian stock market. To open this account, the individual NRI must own a Non-Resident External bank account (NRE). 

• Non-repatriable Demat Account:

This type of Demat account is also designed for NRIs. However, the difference between this account and the repatriable Demat account is that the former doesn’t allow you to freely transfer funds abroad whereas the latter does. To open this account, the NRI must link her/his Non-Resident Ordinary bank account (NRO).

Benefits of Demat Account | Why Should You Open?

If you do not have a trading account and are wondering whether or not to open one, then the below-mentioned benefits will help you make a better decision.

• Open for Free

With Ashika Group, you can open your trading cum Demat account without paying any charges. You can open your personal Demat account online in just 15 minutes and start your investing journey.

• Safe Custody of Securities:

With the digitisation of securities, your investments are safely stored with the depository. Unlike conventional share certificates, these do not bear the risk of theft or forgery.

• Track Live Market

With your Demat account, you get access to the trading platform where you can create a watchlist of your favourite stocks and track their price live. This will keep you informed of the market sentiments and you can make better investment decisions.

• Seamless Experience

By linking your bank account with a trading + Demat account, you can freely transfer funds to and from these accounts. The smooth flow of activities between these interlinked accounts gives you a great trading experience.

• Holistic Ecosystem

As the Demat account can be accessed digitally, it facilitates buying and selling of securities from anywhere. You can remotely access the account with your laptop, smartphone, or tablet.

How to Open a Demat Account?

All thanks to digitisation, the process of opening a Demat account has been simplified over the years. To open a Demat cum trading account in India, go through the following steps.

Step 1: Choose the DP

The first step to opening a Demat account is to pick a reliable broker. There are two types of brokers available in India – (i) full-service brokers, and (ii) discount brokers. You can select the types based on the required services and budget.

Step 2: Fill in the application form

The online account application form is to be filled out. Here you need to mention basic details like full name, PAN, mobile number, address, date of birth, etc.

Step 3: Submit the necessary documents

As proof of identity, proof of address, and proof of income you are required to submit copies of necessary documents. You can keep documents like Form 16, Aadhaar card, voter ID card, passport, electricity bill, bank statement for the last six months, etc. handy.

Step 4: Provide bank details and supporting documents

You need to link your bank account to the Demat account. For this, a copy of the bank passbook and a cancelled cheque are required to be submitted.

Step 5: Complete the e-KYC process

To attest all the documents submitted, you need to complete the e-KYC using the aadhaar number. All you have to do is enter your aadhaar number and authenticate using the OTP sent to your registered mobile number.

Step 6: Login using credentials and start investing

As a final step, you will be sent the login credentials after the completion of successful verification. You can log in to the broker’s trading platform and add funds to make your first purchase.

Document Required to Open a Demat Account

Irrespective of the broker you choose, a particular set of documents is to be mandatorily submitted. Here’s a complete list of all such documents that are required to open a Demat account in India.

• Proof of identity: PAN card, aadhaar card, voter ID, passport, driving licence issued by the RTO, or any other ID issued by the State or Central Government.
• Proof of address: Aadhaar card, passport, voter ID, ration card, RTO-issued driving licence, copy of bank statement or passbook, electricity bill, or gas bill.
• Proof of income: Form 16 received from the employer, salary slip, latest Income Tax Return (ITR), bank statement of the previous six months, or annual income certificate or certificate of net worth duly signed by a CA.
• Bank account proof: A copy of the bank passbook with IFSC and a cancelled cheque.
• Other documents: PAN card and 1 or 2 recent passport-size photographs.

Why Choose Dhanush as your Investing Partner?

• Ashika Group’s Dhanush is a feature-rich platform available with zero account opening charges.
• With 28+ years of trust, Ashika has built a good reputation by providing value to its clients and staying committed to serving them.
• With Dhanush, you get the freedom to trade in multiple asset classes like equity and derivatives along with investing in mutual funds and IPOs.
• Its leading-edge technology lets you optimise your portfolio with Algo trading, real estate investing, and global investing.
• It is one of India’s leading trading platforms with 1,25,000+ satisfied clients and more than 1 Lakh active Demat accounts.
• Back by Ashika’s insightful research reports, you can experience the true power of investing.

So what are you waiting for? Begin your trading and investing journey Today. Make it extraordinary by choosing to open a Demat account with Ashika. Click here to learn more.