By Arnab Dey
Demat account, introduced in 1996, has digitized the stock trading system. It is primarily required to hold your financial assets.
There always has been an eruption in opening Demat accounts. Data shows multiple Demat accounts have been opened in the last few years (2020-22) compared to two decades ago.
So which is the best Demat account according to the Indian Market?
How To Select The Best Demat Account?
The Indian stock market has emerged as one of the most resilient markets among the top 20 worldwide, considering the benchmark movements post-April 2020.
According to Bloomberg, the Nifty 50 has got traction of 114%, the highest among top markets, during the market volatility amid fears of recession. As a result, more investors are showing interest in the Indian Stock Markets.
With increased retail participation, the number of Demat accounts reaches up to 100 million (ten crores) in India. It is an achievement acknowledged by both the Indian depositories – National Securities Depositories Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL).
Let us understand about Demat account opening and the working process.
Demat Account – What Is It Exactly?
A Demat account facilitates electronically holding and transacting financial securities.
A Demat account is an online repository that helps investors securely hold their financial securities. These accounts rest with the central depositories in India – the CDSL and the NSDL.
Securities are debited or credited in Demat accounts under the surveillance of the SEBI (Securities Exchange Board of India). A Demat Account is a primary requirement to invest in the stock market. It is a simple explanation of ‘what is Demat account’. Let us move to its various uses.
How Does An Online Demat Account Facilitates Investors?
Now you know what the Demat accounts are for. But how does the Demat account facilitate the investors? Here are the hints. Read it and know.
1. Diverse Holdings
A Demat account helps you hold various financial assets, including stocks, mutual fund units, exchange-traded funds (ETFs), Digital gold, government securities, commodities, currencies, etc., and trade them on stock exchanges. You can hold your securities in the Demat account for as long as you want.
2. Receive Corporate Benefits
A Demat account helps investors to receive dividend payout directly in the bank account linked with the Demat account. Bonus issues or stock splits are credited to the Demat account automatically.
3. Loan Against Securities
Various financial institutions provide a loan against securities to investors. Many prefer to get a loan against securities in the Demat accounts instead of selling them when in need of money. You can pledge your Demat holdings as collateral as you do for a secured loan.
An attractive feature of a loan against securities is that the borrower enjoys ownership rights of the pledged securities. Also, you will keep receiving the earnings from dividends, and other corporate benefits, like bonuses and stock-split. Thus, your Demat securities can help you during a financial crisis without foregoing potential profit.
4. Leveraged Trading Using Demat Account Shares
Active traders, like intraday traders, often consider margin trading to take advantage of short-term opportunities in the stock market. A margin trading facility (MTF) allows investors to invest in more securities than the available funds to enhance potential profit.
You can pledge your Demat securities to use the MTF facility offered by your stockbroker. Few renowned discount brokers offer to hold the position for as long as 365 days while charging low-interest rates. You can open your Demat and trading account with those brokers for free with their subscription-based brokerage plans.
5. Easy Access To Investment Portfolio
Diversification is the key to successful investing for stock investors. You can check the performance of all your financial assets on a single window using your Demat account. You need not go to different websites or platforms to access your investments’ performance.
Your Demat account facilitates easy monitoring of your financial holdings from the comfort of your home. Whenever you feel your investments are not aligned with your financial goals, you can reallocate investments in your portfolio timely.
6. Easy Liquidation – Speedy Electronic Trading Processes
Whether you want to find investment opportunities, invest in IPOs, receive corporate benefits, or transfer shares, a Demat account makes everything digital and fast. It is easy to sell your Demat securities at the right time to earn potential profits or cut down losses. You can sell your securities electronically within a few seconds by simply clicking a few buttons.
Bottomline:
You just need to log in to your Demat account to take advantage of the stock market opportunities, whether national or international. You can open a Demat Account by visiting the website of a depository participant.
Many stockbrokers are depository participants, and they offer Demat & Trading Accounts. This account can be opened online with zero paperwork and from the comfort of home.
Disclaimer: Every type of Investment is subject to market risk. Before signing any of the documents, carefully read all the related documents.
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