Good Question to ponder upon today: What is a Demat Account? and How do you buy shares online?
To buy shares using a Demat account, you first need to open an account with a depository participant. Here’s us helping you save some time: Open your Demat Account with Bajaj Broking by clicking here.
Once your account is set up, you can purchase shares online and store them electronically. This article will address all your questions about buying shares through a Demat account.
Gone are the days when buying shares involved filling out lengthy forms and jostling through crowds to place bids. The process didn’t end there; investors also had to stand in long queues to collect share certificates and store them in folders. Selling shares meant repeating the same tedious steps all over again.
India has moved on from the old method with the advent of Demat-based share purchases and sales. Now, you can buy shares with a single click and sell them instantly. When you buy shares through an online trading account, they are transferred directly to your Demat account. Similarly, when you sell shares, they are debited from your Demat account.
What is a Demat Account?
Demat or Dematerialized Account is an electronic account where you store the shares you buy through a stock exchange, say NSE or BSE. In India, Demat Accounts are maintained by Central Depository Services Limited and National Securities Depository Limited.
The concept came into existence in 1996 and has been the preferred mode of storing shares for investors since then. A Demat Account takes away the pain of archiving physical share certificates. Investors can use a Demat Account to store everything from equity shares and bonds to mutual funds, debt securities, and Government securities. A Demat Account is mandatory in India to buy shares on delivery.
4 Steps You Should Follow to Invest in equities through a Demat Account
1. Obtain a PAN Card
A Permanent Account Number (PAN) is necessary for investing in shares and trading on the stock exchange. The Income Tax Department issues PAN cards, which can be applied for online or in person through an authorized agent.
The Indian Government has made it mandatory to provide a PAN for all financial transactions. A PAN is a ten-digit alphanumeric identifier used by the Government to track the tax liabilities of Indian citizens. You are eligible to open a Demat Account only after obtaining a PAN.
2. Open a Demat Account and Online Trading Account
As mentioned earlier, Demat Accounts are maintained and operated by CDSL and NSDL. To open a Demat and online trading account, you need to approach a Depository Participant or broker, such as Bajaj Broking.
Bajaj Broking offers free Demat account opening for all eligible Indian investors. The broker simplifies the process of opening both Demat and trading accounts. You can easily access your Demat account through the broker.
An online trading account allows you to buy or sell shares both online and through phone calls. To buy shares online, you must visit the broker’s website or download its app from the Google Play Store or Apple App Store. You can conveniently select the stocks you wish to purchase or sell and complete the transaction during market hours.
Alternatively, if you prefer placing orders via phone, you can call the broker’s trading helpdesk. Some brokers charge a nominal fee for placing orders over the phone, while online orders are generally free.
3. Link Your Bank Account
Just like the PAN, having a bank account is also important for share trading. If you don’t have a bank account, it’s high time you open one.
Before you invest your money in the stock market, you need to transfer the investment amount from your bank account to your online trading account.
Once you place a buy order, the shares will be credited to your Demat Account within two business days from the transaction date (T+2).
Similarly, when you sell your holdings, the money will be transferred to your trading or bank account within T+2 business days.
4. Start Trading
Once your account is set up, you can open the broker’s online trading app, find the stocks you want to purchase, and place a buy order.
Stockbrokers generally provide margin trading, allowing you to buy shares beyond your available account balance.
For example, if you have ₹10,000 in your account and your broker provides a margin of five times, you can buy shares worth ₹50,000.
Benefits of Trading with a Demat Account
So far, you have learned how to buy shares using a Demat Account. Now, let’s explore some benefits of having a Demat Account:
- Easy Trading: Trading has become easier and cheaper.
- Access Anywhere: You can monitor your trades from anywhere—whether at home, in the office, or even while traveling—through your broker’s online portal.
- Quick Settlements: Trades are settled much faster now, within two days, rather than weeks.
- Lower Costs: Online trading using a Demat Account reduces costs by saving on paper charges and stamp duties.
- Collateral for Loans: You can use the holdings in your Demat account as collateral to secure loans.
Things You Must Do to Make Your Demat Account More Robust
Once you have opened a Demat account to buy shares, the responsibility is on you to take all necessary steps to keep your Demat account safe and secure.
One important task is to regularly cross-check your contract notes with your Demat Account statements for any discrepancies in the amounts. While the Demat Account is offered free by Bajaj Broking, it should always maintain a positive balance.
If the balance reaches zero, even for a single day, the stockbroker may freeze the account. This could delay the process of revival until a new KYC form is submitted.
Documents Required To Open A Demat Account
To open a Demat account, you will need to provide several documents to verify your identity, address, income, and bank account details.
Generally, it will require proof of address such as a passport, utility bills, or driving license; proof of identity such as an Aadhar card, passport, or PAN card; copy of PAN card for tax purposes; proof of income that could be a copy of ITR or salary slip; a canceled cheque to prove the bank account; and one to three passport-sized photographs. This list is not exhaustive and for the most up-to-date requirements, please click here.
Open a Free Demat Account Buy Shares Seamlessly
Bajaj Broking offers you an easy interface to open demat account and buy shares with ease. You can open an account by uploading your PAN, Aadhar, and bank details and saying ‘Hi’ to a new era of investing.
Conclusion
Now that you know how to buy shares with a Demat account, start investing today. If you do not have a Demat Account yet, Bajaj Broking can assist you in opening one quickly with minimal paperwork. You will be ready to start investing in no time.
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