Just as you have a Bank account for the saving and safe keeping of all your money, the Demat account is for the safe keeping of all your shares and other eligible securities. The securities are held in this account, in an electronic, also called the dematerialized form. The Demat account can be opened with a Depository Participant. You have to approach the DPs (like bank branches), to open your Demat account.
Demat account allows you to buy, sell and transact shares without the endless paperwork and delays. It is also safe, secure and convenient.
Let’s say your portfolio has 100 of ABB, 100 of TATA Motors, and 250 of Sun TV, shares. All these will show in your Demat account. So you don’t have to possess any physical certificates showing that you own these shares. They are all held electronically in your account. As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.
Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of up to 500 shares to be settled in physical form, nobody wants physical shares any more. So a Demat account is a must for trading and investing.
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