Steps of Purchasing and Selling of Shares Through Demat Account
You open a Demat account to trade in the financial market. However, simply having a Demat account online is not enough. To purchase & sell shares in a Demat account, it is important to acquaint yourself with the procedure to operate your Demat account in India.
New investors often complain of the technicalities that appear complicated, which in turn hampers their ability to trade and invest in shares. Luckily for us, having a Demat account enables hassle-free and convenient trade of shares online.
Before you learn how to purchase & sell shares in a Demat account, it is important to understand the basics.
Understanding the Functions and Workings of a Demat Account
A Demat account online holds your shares and securities in an electronic (dematerialised) form. Meaning, the shares that are traded online are purchased and held in your Demat account. Once you open a Demat account, you can use it to not only hold your shares online but also other financial commodities such as government securities, mutual funds, bonds, exchange-traded funds, etc., all under a single account.
Demat account in India is maintained by two depository organisations, namely the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CSDL). And the services of a Demat account are facilitated by depository participants (DP), which could be a bank, a brokerage firm, or other financial institutions.
How to Purchase & Sell Shares in Demat Account
The first step to trading and investing in shares online is to open a Demat account. To open a Demat account in India, a potential investor will have to register with a brokerage firm that will help them open a Demat account and provide the investor with a unique customer ID to access their Demat account.
Having a Demat account online is not enough in itself. To trade, an investor will have to have a trading account that has to be linked to their bank account. A trading account that is linked to a Demat account shows the purchase and sell history. Once the purchase price is charged, the broker transfers the shares to the account of the investor.
As per SEBI’s mandate in 2019, the exchange of stocks is not possible without a Demat account online. Additionally, having physical shares complicates trading, which is made convenient with having shares online.
You can link your Demat account with your trading account for share allocation, which enables you to view your most recent Demat holdings. An investor can allocate all their shares online at once with the “Allocate Share” option. How often this needs to be done depends on the frequency of purchase & sell shares in the Demat account.
To make informed decisions concerning your Demat account, it is important to be acquainted with some key concepts: -
- Power of Attorney: By giving a power of attorney, you can allow someone else to manage your Demat account.
- Corporate Benefits:The bonuses, breaks, and rights announced by companies can be immediately viewed in your Demat account online.
- Investing: Once you open a Demat account, you can invest in the capital market and devise systematic investment strategies for wealth creation.
- Nomination Facility: This enables investors to choose a nominee who will receive all the account holdings upon the investor’s passing.
Benefits of Having a Demat Account Online
When you open a Demat account, you can use it to hold your shares and securities and trade stocks, bonds, and shares online from the comfort of your home. SEBI encourages investors to purchase & sell shares in a Demat account because it enhances the security and convenience of trading. Following are some of the benefits you can get when you open a Demat account:
- Check the price of any shares quickly and conveniently.
- Having a Demat account online ensures that your shares are not stolen or damaged as they are stored in a dematerialised form. It also eliminates the risk of forged shares.
- You can analyse securities and shares online to make an informed investment decision.
- A Demat account online enables quicker settlement of transactions and is also cost-efficient.
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A Demat account is only meant to hold your shares and securities. If you wish to trade in the financial market, you will need a trading account that is linked to your bank account.
Demat is short for Dematerialisation. The process of transferring your physical shares into an electronic format to be held in your Demat account in India is called Dematerialisation. This makes it convenient and easy to manage and hold your shares and enables their access from anywhere in the world. All you need is an internet connection and your unique customer ID to access your Demat account online.
Dematerialisation is the conversion of your physical shares into an electronic form to be stored in your Demat account. Conversely, rematerialisation allows the conversion of your shares online into physical shares. Rematerialisation is usually done when the Demat account only holds one or two shares and the investor does not wish to pay the maintenance charge to have these shares online.