How to Buy Shares through Demat Account?
5paisa Research Team
Last Updated: 05 Jul, 2024 10:35 AM IST
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Content
- Introduction
- What is a demat account?
- 4 Steps You Need to Buy Shares Through a Demat Account
- Things You Must Do to Make Your Demat Account More Robust
- Open a Free Demat Account Buy Shares Seamlessly
Introduction
Gone are the days when purchasing shares meant filling up elaborate forms and jostling with the crowd to place bids for buying shares. The ordeal did not end there since the investor had to wait in the queue to collect share certificates and preserve them in a folder. And, the selling of shares meant following a similar process all over again.
With the arrival of demat-based share purchase and sale, India has said goodbye to the old method. Presently, you can purchase shares with a click and sell them instantly. As you buy the shares using an online trading account, the shares are transferred to your Demat account. Similarly, when you sell shares, they are sold directly from the demat account.
What is a demat account?
Demat or Dematerialized account is an electronic account that stores the shares you buy through a stock exchange, such as NSE or BSE. In India, Demat accounts are maintained by Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL).
The concept came into existence in 1996 and has been the preferred mode of storing shares for investors since then. A demat account takes away the pain of archiving physical share certificates. Investors can use a demat account to store everything from equity shares and bonds to mutual funds, debt securities, and government securities. Demat account is mandatory in India to buy shares on delivery.
4 Steps You Need to Buy Shares Through a Demat Account
1. Obtain a PAN Card
To buy shares and trade in the stock market, you need a Permanent Account Number (PAN). The Income Tax department oversees PAN card issuance. You can apply for a PAN card online or through an agent.
The Indian government has made it mandatory to quote the PAN number for making all financial transactions. PAN is a ten-digit alphanumeric number the government uses to track Indian citizens' tax liability. You become eligible to open a demat account only after getting the PAN.
2. Open Demat Account and Online Trading Account
As previously said, demat accounts are maintained and managed by CDSL and NSDL. To open a demat and online trading account, you need to approach a Depository Participant (DP) or broker, such as 5paisa. 5paisa provides free demat account opening for all eligible Indian investors. The broker facilitates smooth processing of Demat and trading account opening. As a fact, you can access your demat account seamlessly through the broker.
An online trading account allows you to buy or sell shares both online and through phone calls. If you buy shares online, you have to visit the broker's website or download its app from Google Playstore or Apple App Store. You can conveniently select the stocks you wish to purchase or sell and sell them during market hours. However, if you want to place orders through a phone call, you have to call the broker's trading helpdesk and place the order. Some brokers charge a nominal amount for placing orders over a phone call. The online order placing is free, though.
3. Link Your Bank Account
Just like the PAN, having a bank account is also important for share trading. If you do not have a bank account, it's high time you open one. Before investing your money in the stock market, you need to transfer the investment amount from your bank to the online trading account. Once you place a buy order, the shares get credited to your Demat account within two business days from the transaction date or T+2. Similarly, the money gets transferred to your trading or bank account within T+2 business days when you sell your holding.
4. Start Trading
Once your account gets ready, you can open the broker's online trading app, find the stocks you want to purchase and place a buy order. Stockbrokers generally provide a margin for buying shares over and above the available account balance. For example, if you have ₹10,000 in your account and your broker provides a margin of five times, you can buy shares worth ₹50,000.
Things You Must Do to Make Your Demat Account More Robust
Now that you have opened a demat account to buy shares, it is your duty to do the things required to make your demat account safe and secure.
You must check your contract notes with the demat account statement to look for any discrepancies. Although some Depository Participants, such as 5paisa, offer a free demat account, you must ensure that the account balance never reaches zero. If the account balance reaches zero, the stockbroker might freeze your demat account, and you may have to fill the KYC form again to revive your demat account.
Open a Free Demat Account Buy Shares Seamlessly
5paisa provides you with a smooth interface to open a demat account and buy shares conveniently. You can create an account by uploading your PAN, Aadhar, and bank details and say 'Hi' to a new era of investing.
More About Demat Account
- How to Find Demat Account Number from PAN
- How to fill a Dematerialisation Request Form
- How to Convert Physical Shares into Demat
- What Is DP ID In The Demat Account
- What Is Dematerialization of Shares?
- What Is a Demat Account Holding Statement?
- Lowest Brokerage Charges in India For Online Trading
- Low Brokerage Charges in India
- How To Save Tax In India Without Investment?
- Best Demat Account for Beginners in India
- Do we need Demat Account to invest in MF?
- Aims and Objectives of Demat Account
- What is BO ID?
- What is a bonus share?
- How to Close Your Demat Account Online
- How to Open Demat Account Without Aadhaar Card
- Open Demat Account Without A PAN Card - A Complete Guide
- Myths & Facts about Demat Account
- What Is Collateral Amount in Demat Account?
- What Are DP Charges?
- How to Link Aadhaar Number With Demat Account?
- How to Convert Demat to BSDA?
- Dos and Don'ts of Demat Account
- Difference between NSDL and CDSL
- Advantages and Disadvantages of Opening a Demat Account
- 5 Things to know About Loan Against Demat Shares
- What is NSDL Demat Account?
- What is a Minor Demat Account?
- NRI Demat Account Opening Process
- What is a Basic Service Demat Account?
- How to Transfer Money from Demat Account to Bank Account
- How to know your Demat Account Number
- How to Buy Shares through Demat Account?
- How many Demat Accounts one can have?
- Demat Account Charges Explained
- Eligibility to Open a Demat Account
- How to Transfer Shares from One Demat Account to Another?
- Types of Demat Account in India
- Dematerialisation & Rematerialisation: Meaning and Process
- Difference between Demat and Trading Account
- Demat Account Nomination - How to Add Nominee
- How to Use of a Demat Account
- Benefits of a Demat Account
- Documents Required to Open a Demat Account
- How to Open Demat Account Online?
- What is Demat Account? Read More
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