Demat account or dematerialization of accounts started in India in 1996 and since then the Indian stock market has never looked back. After demat accounts were introduced, our country has seen a steady rise in the listing of companies and the participation of investors in the stock exchanges such as the BSE and NSE.
By the end of 2019, India had 39.3 million demat accounts; up from 34.8 million accounts in 2018. Demat accounts grew by 4.5 million in 2019 and 4 million in 2018. Therefore, the speed of opening new demat accounts is rising every year.
One of the major reasons for this growth is that Indian investors are moving away from traditional investment instruments such as real estate, gold and FDs. Finally, they are showing more interests in mutual funds, equity investments, derivatives, commodities, currencies and IPOs.
But before we delve deeper into demat accounts, investing and trading, it’s important to have your basics right. So, let’s start with the basics first.
What is a demat account?
A demat account is an electronic system of storing securities. It is like a savings account that allows you to maintain, buy and sell securities on the financial exchanges such as BSE, NSE and MCX. With a demat account, you can store, buy and sell equity, bonds, mutual funds, IPOs, commodities, derivatives and exchange-traded funds (ETFs).
The National Securities Depository Limited (NSDL), which deals with securities traded at the NSE, and Central Depository Securities Limited (CSDL), which acts as a depository for BSE, are responsible for as depositories for demat accounts operating in India.
Types of demat accounts
There are 3 types of demat accounts available in India.
1. A regular demat account for investors who reside in India.
2. A repatriable demat account for non-resident Indians (NRIs). With this demat account funds can be transferred abroad but it has to be linked with an NRE bank account.
3. The last type of demat account is called the non-repatriable demat account. It is also used by NRIs but they cannot transfer funds abroad with this demat account. This type of demat account has to be linked with an NRO bank account.
Benefits of a demat account
With a demat account all your securities such as shares, options, futures, commodities, mutual funds, debentures, ETFs and bonds are stored in electronic format. It’s easy for you to buy, sell and hold these securities and track your investment portfolio from a single window. A demat account offers 5 major benefits that are vital for success in investing and trading.
Easy and constant access
A good quality demat service account gives you 24×7 access to the market from anywhere in the world on any device. You don’t have to be in your office to place a trade, invest or track your portfolio; you can easily access your account through a desktop, laptop, tablet or smartphone.
Liquidity
Liquidity or the ability to sell your securities whenever you require funds is an important aspect of trading and investing in the financial markets. With physical shares and certificates, it’s very difficult to achieve swift liquidity but with a demat account you are ready to buy or sell when the market reopens the next day. With a demat service you can place a buy or sell order easily and get it executed within a few seconds before any significant price movement occurs.
Convenience
It is fast and convenient to transact in securities with a demat account. It is even more convenient if you have a 2-in-1 demat and trading account as it allows you trade and invest seamlessly. Ensure that you have your demat and trading account with the same broker to avoid delays in fulfilling transactions.
Angel One’s 2-in-1 demat and trading account allows you to trade and invest seamlessly in equities, IPOs, commodities, currencies, derivatives and mutual funds.
Speed and efficiency
Before demat services went full fledged in India, investors had to wait for weeks and sometimes months for credit of refunds, interests and dividends into their accounts. Receiving dividends, rights, bonuses and stock splits, as well as investing in IPOs is fast and easy thanks to demat accounts.
Less risky
When your securities are stored in electronic form, you don’t have to worry about theft, damage and frauds that were normally associated with physical certificates. As your assets are being stored in an electronic format, you also don’t have to worry about misplacing or losing them.
Things to check before you open a demat account
Before you open a demat account with a broker, you should check a few things such as:
- Whether you are dealing with a discount broker or a full-service brokerage firm
- Brokerage fees, annual maintenance charges, transaction charges and others on the demat account
- Credentials of the broker – whether the broker or DP is registered with SEBI
- Check for any cases or complaints pending against the broker or brokerage firm
- Check for value-added services such as research, insights and analytics available with your demat and trading account
Whether you are a beginner to investing and trading or a seasoned professional, you will get access to industry leading trading platforms, well-research market reports and insights with a 2-in-1 demat and trading account from Angel One. With Angel One you can enjoy zero cost equity delivery trades for a lifetime and carry out intraday trades in various market segments of BSE, NSE, MCX and NCDEX at just Rs. 20 per order.
