For investing and trading in the Indian stock market, opening a demat account is the primary requirement. To transact in the Indian stock market it is compulsory to have a demat account. Therefore there are a few things that you must know before opening a demat account. In this article, you will learn about the things that you must keep in mind before opening this account.
Let us first learn about the meaning of the demat account.
What is a demat account?
A demat or dematerialised account is an account that holds you are shares and securities in digital or electronic form. If you have physical shareholdings in the form of share certificate then you can convert them into electronic format using the demat account.
Before opening a demat account you must be aware of the different types of depository participants (DP) or brokers in the market. In this section of the article, you will learn about different types of brokers.
Different Types of Brokers
Depository participants orbrokers open the demat account. The depositories authorize the depository participants. There are two depositories in India; the National Securities Depository Limited (NSDL) and Central Depository Securities Limited (CDSL). Your demat account will be opened with either of these depositories depending on the type of broker you select. There are two types of brokers in the market; service brokers and discount brokers. Discount brokers carry out transactions on your instructions in the equity and derivative segment. While the service brokers provide all the services of discount brokers and also give you services like stock investment tips, IPO investment tips, research reports, investment in mutual funds, etc.
Let us now learn about how to open a demat account.
How to Open Demat Account?
- Fill the account opening form after selecting the broker.
- Submit the necessary documents.
- The broker will give the rules and regulations copy to you. Make sure to read it carefully.
- The broker will send a member at your place to carry out in-person verification. This is done to cross-check the details given by you in the account opening form.
- On successful processing of the application, the broker will provide you with a demat account number. He will also hand over to you a login Id and password so that you can transact using your demat account from anywhere across the globe.
Let us now learn about the documents that you will need for opening the demat account.
Documents for Demat Account Opening
- PAN Card copy.
- Copy of address proof like Aadhar CARD, ration card, passport, etc.
- Copy of ID proof likepassport, driving license, Aadhaar Card, etc.
- Cancelled cheque.
- 2 passport size photographs.
- Copy of passbook’s first page with bank account details and IFSC Code.
Let us now learn about the working of demat account
Working of Demat Account
When you open the demat account, the funds from the bank are transferred to the trading account. The buying and selling of shares are done through the trading account and the shares are debited from the demat account. Therefore, opening a trading account along with a demat account is compulsory for buying and selling the shares.
The above are some of the points that every investor must keep in mind while opening a demat account. To learn more about trading and investing in the stock market, you may visit Trading Fuel. We are the leader in providing free stock market education through blogs and articles. We regularly update the content on our website to help the investors of the stock market. To know more about the stock market information, you may subscribe to our website.