Procedure of Buying & Selling of Shares Through Demat Account | My Espresso

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.

Published on 06 February 2023

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.

Things You Must Do to Make Your Demat Account More Robust

After creating a Demat account for shares selling and buying, you should take the required measures to secure the account. Start by checking your contract notes associated with the account statement to spot discrepancies.

Some depository participants let you create a free Demat account for shares selling and purchasing. However, you should never let the balance of your Demat account go down to zero.

When the account balance reaches zero, your stockbroker might freeze the account. In that case, you will have to fill out the KYC details once again and revive your Demat account.

4 Steps You Need to Buy Shares Through a Demat Account

If you are wondering how to buy shares through Demat, you need to focus on these steps:

1.    Get a PAN Card

When you are wondering how to buy shares through Demat, you will have to get your PAN card. The IT department is responsible for issuing PAN cards. You will be able to apply for a PAN card via an agent or apply online.

As per rules set by the Indian government, you will have to provide your PAN number for all financial transactions. The PAN number contains 10 digits which are useful for the government to check the tax liability of individuals. You will be able to open a Demat account and trade shares only when you have a PAN card in your name.

2.    Open Your Demat Account and Trading Account Online

Demat accounts are supervised by CDSL and NSDL. To create your demat account, find a reliable broker or depository participant. The broker will help create your account through a smooth process.

You will be able to access your Demat account via the broker anytime you want. They will also provide valuable insights related to how to buy shares through Demat.

You will also have to open your trading account online. A trading account is useful for share trading online as well as via phone calls. When you intend to buy shares online, you will have to visit the website of your broker or download their app. Select the stocks that you desire to sell or purchase during market hours.

To trade shares via phone calls, you will have to contact the helpdesk of your trader and place the order. Brokers usually charge a nominal fee for share trading via phone calls. On the other hand, online trading is usually free.

3.    Link Your Bank Account

You should also have a bank account to trade shares. Before starting to invest in the stock market, you will have to transfer the investment amount from your bank to your online trading account. When you sell shares, the money gets transferred to your bank account within T+2 business days.

4.    Start Trading

Once you have created all the required accounts, you will have to open the trading app of your broker and place your order for the stocks that you want to purchase. Stockbrokers usually specify a margin for purchasing shares over the balance in your bank account.

For instance, when you have a balance of Rs 10,000 in your account, your broker might set a margin of five times. Therefore, you will be able to purchase shares of up to Rs 50,000.

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.
    Also Read: Demateriliasation of Securities
Chandresh Khona
Team Espresso

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