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How to trade shares online using demat account

Introduction

If you have dreamed of becoming a successful trader or stock market investor, you probably know that you need to begin somewhere. First and foremost, to buy stocks, you need an online Demat account that you can set up in a matter of minutes and from the comfort of your home. But how to go on from there may be challenging, especially if you are new to the trade.

The process of buying shares

In India, all stock exchange transactions take place in the dematerialised mode. So, if you're looking to know how to buy shares through your Demat account, you would also know that you would require a trading account as well. That's because your Demat account stores your shares and securities. Just like your bank account stores money, your Demat account functions as a depository where shares are stored and withdrawn. 

On the other hand, the buying and selling of shares takes place through the trading account. Therefore, when you purchase shares or equities, you need to execute the trade in your trading account. The shares then automatically get transferred into your Demat account on T+2 days.

Operating a Demat account

On opening your online Demat account, you will be provided with your unique Demat account number that needs to be quoted when transacting in shares.

You can only open a demat account with a Depository Participant [DP] registered with the National Securities Depository Limited (NSDL) or Central Securities Depositories Limited (CSDL).

Can a Demat account be used purely to buy shares without a trading account?

If you are investing in an Initial Public Offering [IPO], you only require your Demat account.

To understand this, you may want to know that the company issuing an IPO is not listed on the stock exchange when its is issued. Hence, you cannot purchase their stock in the secondary market. Therefore, to apply for the IPO, you use your Demat account.

On a successful IPO allocation, you will receive the respective shares automatically credited into your Demat account. In the case of IPO investments, it is not necessary to have a trading account to purchase IPO shares. However, if you wish to sell the shares after the IPO allotment, you will have to do it in the secondary market, and hence a trading account will be required.

Demat Account Due Diligence

When it comes to maintaining your Demat account, there are some tasks to be followed. 

  • To check for any discrepancies, it can help to reconcile your contract notes with your Demat account every fortnight.
  • You can maintain a zero balance Demat account. However, if there has been no activity for an extended period of time, the Depository Participant [DP] will freeze your DP account. To reinstate, you will have to undergo the Know Your Customer [KYC] procedure all over again to operate your Demat account. 
  • Before you begin trading, insist on receiving pre-printed Delivery Instructions Slip [DIS] booklets and keep them in your safe possession. 
  • Also, it can be a good idea to get holding statements from your DP every month.

Your Demat account is a safe and secure method of purchasing shares and securities. Not only is it convenient, but taking due diligence and ensuring you abide by a few fundamental precautions can go a long way in keeping your Demat account secure and sound.

Conclusion

As you gain experience, build up your financial literacy as well. Stock market investments are regarded as one of the best long-term investments to build and grow one's wealth. To receive tailored recommendations, you may want to seek out a top-tier, full-service and well-established broker with a sound and long track record.

Disclaimer : ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.

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