What is Demat & Trading Account.....

What is a Dematerialisation (Demat) Account?

For open online demat account click here- Demat account

Demat is a short form of Dematerialisation. Dematerialization is the process of converting physical shares into electronic form.

A Demat account is an account that allows investors to hold their financial products in the electronic form. Having a Demat Account allows you to buy shares and store them safely. It is similar to a bank account in which you hold deposits with the bank and the record of debit/credit balances are maintained in a bank passbook. In the same way, when you purchase or sell shares, it will be credited or debited to/from your Demat Account respectively. It can be used to hold a variety of investments like equity shares, exchange traded funds, mutual funds, bonds, and government securities. You can open a Demat Account without possessing any shares and can maintain a zero balance in your account.

 

Why Demat Account?

For trade in stock market Demat Account is mandatory.

With a Demat account you can hold the certificates of all your financial products such as MUTUAL FUND, EXCHANGE TRADED FUND (ETFs), Shares and Bonds online.

In India only two depository CDSL and NSDL that approve a Demat account opening and hold shares in electronically.

CDSL-Central depository service limited.

NSDL-National securities depository limited.

Depository Participants (DPs):-

There is many banks and other broker known as depository participants (DPs) who act as intermediaries between the investor and the depository. They help you open the Demat Account...

What is a Trading Account?

A trading account is an interface that allows buying and selling of equity shares in a stock market. It acts as an interface between the investors’ bank and Demat accounts. Shares purchased through this account are credited to one’s Demat account. Sold shares are debited from the Demat account and sales proceeds are credited to the bank account. There is no restriction on the number of Demat accounts that an individual can avail.

How does a Trading Account work?

A trading account acts like a link between demat account and bank account of an investor. When an investor wants to buy shares, he places an order through his trading account. The said transaction goes for processing in the stock exchange. Upon execution, the required number of shares get credited into his demat account and a proportionate sum gets deducted from his the bank account.

A similar kind of process is followed in order to sell equity shares. The investor places a sale order for say 100 shares with the help of his trading account. It goes for processing in the relevant stock exchange. When the order is executed, the required number of shares are debited from his demat account and a proportionate sum gets credited to his bank account.

Documents Required for Demat & Trading account.

Proof of identity-PAN,voter ID,passport etc.

Address proof-Ration card, Bank passbook etc.

Passport size photo.

Proof of Income

Bank details.

Form-Online or Offline.