With the introduction of the demat account, almost all the transactions in the stock exchanges happen through this account. Therefore, it becomes very important to understand how you can transact through the demat account.
Demat account is the primary requirement for trading or investing in the Indian financial market. Before learning how to start trading with demat account you must know what is a demat account. Let us first understand its meaning.
Demat account is just like a bank account that holds your shares or securities in an electronic form. The demat account can hold not only equities but also your investments in mutual funds, bonds, exchange-traded funds and government securities. Whenever you purchase any share from the stock market, it is done through the trading account. On T+2 days the shares get automatically credited into your demat account.
Let us now learn about buying shares into a demat account through Initial Public Offer (IPO).
When a company comes out with an IPO issue, it means that it is not listed on the stock exchange and it wants to get listed by issuing fresh shares of the company to the public. The company may use the funds collected from IPO for any of its business activities like expansion, diversification, reducing debt, etc. As an investor you have to apply for the shares through an IPO application. This is possible only if you have a demat account. When the allocation of IPO shares is complete, the shares will get credited into your demat account automatically. There is no need for a trading account to purchase shares from the primary market.
After learning the process to purchase shares from the IPO or primary market, let us now learn about buying shares through a demat account in the secondary market.
When you want to buy shares in the secondary market i.e. directly from the stock exchange where the companies are listed, you will require a trading account. Your buy trade will get executed through the trading account and the shares will get credited into your demat account on T+2 days. The process of shares getting transferred into your demat account is automatic. However, your broker may hold up the transferring of shares into your demat account if any payment is due from your end.
As you are aware that the demat account is the primary requirement for purchasing shares, there are some things that you must do while operating this account. In this segment, we will learn about all those things that you must do.
The above mentioned are a few things that you must do when you have a demat account. There is no doubt that the demat account is the safest and secure way to carry out transactions. If you are new to the stock market and want to open a demat account, you may consider opening the account with Kotak Securities.
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