How Demat Account Changed Share Trading In India

Share trading in India has seen a dramatic change in the last 30 years. From the public outcry system to the screen-based electronic trading system currently in place, technology has rapidly changed the way Indians trade.

The biggest change has been the shift from physical investments to electronic investments. This is possible because of the demat account. The demat account is an electronic account where financial investments can be stored. The best demat account in India stores instruments like equity shares, mutual funds, exchange traded funds, derivatives, bonds, and non-convertible debentures.

The online demat account has completely changed the way people trade in India.

Here are 7 ways in which the demat account changed share trading in India:

Record keeping:

One of the biggest ways in which an online demat account has changed share trading is by allowing for electronic record keeping. Earlier, physical records had to be maintained for each trade. Share certificates were available in physical form and these had to manually be transferred to the buyer. These share certificates were at risk of theft, soiling, misuse, fraudulent transfers etc. With electronic transfers and dematerialisation, there is no need for a physical share certificate.

Portfolio tracking:

With the public outcry system, people had to manually add up the value of their portfolio by checking the share price in the newspapers after the trades for the day were completed. Now, with electronic screen based trading and online demat account, it is possible to check the value of your portfolio in real time, thus allowing you to take decisions in real time.

Audit trail:

Since all the investments are done online, there is an automatic audit trail generated. A PAN is compulsory to open a demat account which tracks and logs all the transactions against the PAN. This makes it easy for the Government to assess the tax liability from capital gains.

Corporate actions:

Earlier, getting credit for dividends or bonuses depended on whether the company’s share register was updated. The onus to collect the dividend was on you. With an online demat account, dividends get automatically credited to your bank account. Any corporate actions like bonus shares, stock splits, consolidation are reflected directly in the free demat account.

Cost efficiency:

Maintaining physical share certificates involved costs like registration and share transfer costs. When you open demat account, you only need to pay an annual maintenance fees and a transfer fee for debit transactions. These fees depend on the depository participant. Some may waive annual maintenance fees for a few years as a part of promotions. This brings down the cost even further.

Easy transfers:

Making share transfers between free demat account and also when you make purchases and sales has become convenient. These trades can be made from the trading account by the investor anywhere. There is no need to physically be present at the stock exchange to log-in an order. All the transfers happen automatically.

Simple formalities:

You can open demat account online or offline. The procedure to open demat account is very streamlined and simple. You need to fill the account opening form and submit the required documents to the depository participant and on verifying these details, the online demat account will be created.

You can open demat account online with any depository participant including a reputed stock broker like IndiaNivesh who can help you with the backend support you need for your trades. Once you open demat account and trading account, you can begin share trading.

Nirav Singhaniya is a Financial Advisor and Share Marketer with 10 years of experience. In his free time, he likes to research on stock trading and share market trends.