In recent years, there has been a remarkable change in the investment landscape among Indians. Moving away from traditional bank deposits, many are now venturing into equity investments, as reflected in the growing retail equity holdings in Indian stocks.
This increase in equity investments is attributed to the increase in awareness about equities, facilitated by regulatory efforts and willingness to take some level of risk, which encourage young Indians to explore stock market investments.
Read also: Digitization of securities and transparency
The increase in retail participation is emerging as a major driver for the Indian stock market, prompting many firms to actively raise funds through the stock market route.
To dip your toes into the world of stock investing, having a demat account is a must. This account offers more benefits than just facilitating the buying, selling and holding of shares.
Let’s explore the additional benefits that come with having a demat account.
Main benefits
Access to IPOs and Corporate Actions: If you have a demat account, you can participate in Initial Public Offerings (IPOs) and receive dividends, bonuses and other corporate actions directly into your accounts.
Simplified Transfer Processs: Any number of securities can be transferred/delivered with one delivery instruction. Therefore, paper and signature of multiple transfer forms are eliminated.
Also Read: What is a demat account and how does it work? MintGenie explains
Appointment Facility: Investors can nominate beneficiaries for their demat accounts, ensuring smooth transfer of assets in case of unforeseen events.
Portfolio Management: Demat accounts offer features for easy tracking and management of investment portfolios. Investors can check their holdings, view transaction history and receive updates on company actions conveniently.
Electronic Storage: Demat accounts provide a safe and convenient way of holding securities in electronic form, eliminating the need for physical share certificates.
Proposing agencies
In India, Demat account services are primarily provided by two depositories known as NSDL and CDSL. These services are further facilitated by many “deposit participants”, such as banks, which act as intermediaries.
Also Read: How to start investing in the stock market – A step-by-step guide
Frequently Asked Questions
What is the deposit and withdrawal in demat account?
Payment refers to the process of depositing securities or funds into your demat account. Funds can be added with a minimum of ₹100, and the maximum may vary depending on the broker. Withdrawal involves withdrawing securities or funds from the demat account to the registered bank account.
Is a demat account required to participate in IPOs?
Yes, having a demat account is typically required to participate in Initial Public Offerings (IPOs), as shares allotted during an IPO are credited directly to the investor’s demat account.
What are the charges for maintaining a demat account?
Charges for maintaining a demat account vary depending on the broker. Typically, they include annual maintenance, transaction costs and other applicable taxes or fees.
Will a broker sell shares if the account is not opened regularly?
No, the broker will not sell shares if one does not open the demat account regularly. However, it is essential to stay informed of any communication from the broker or depository participant regarding account maintenance to avoid potential problems.
Can securities in demat mode be pledged?
Yes. Securities held in demat mode can be pledged. Moreover, procedure to pledge securities in demat form is very convenient, both for the pledger and the pledgee.
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Published: 04 Mar 2024, 18:26 IST