More and more retail investors these days are expanding their investment portfolios from bank deposits and real estate to stocks and mutual funds. This opting of non-traditional financial products has resulted in the soaring demand for demat accounts in India. According to data gathered from share depositories NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services India Ltd), the number of demat accounts opened in 2017-18 peaked to 3.76 million(up to 28.02.2018). Compared to the close to 3 million figure in 2008, this is the highest ever figure for a financial year.
Sensex has touched 37000 for the first time in History .NSDL has 1,73,05,324 active accounts and CDSL has 1,53,51,426 active accounts as on 30.06.2018.
To understand the significance of these numbers, we will first take a good look at the meaning of a demat account.
What is a Demat Account?
A demat account is an electronic platform that holds all your shares and securities in one place through the process of dematerialisation. It is an effective answer to the age-old problem of having to maintain physical records of investment certificates and other important paperwork. Demat accounts are quite similar to bank accounts in the sense that you can make trade transactions, which will immediately reflect as debit or credit.
When you buy and sell shares electronically, they are recorded in the demat account. Ever since online trading was introduced, operating via demat accounts has become a standardised format among investors. They can be used to hold different types of investments made by an individual, including but not limited to mutual funds, bonds, and government securities. One of the biggest advantages of having this account is that it does not attract any stamp duty, unlike its physical counterpart.
Just as in a savings account, you can check your demat account statement from time to time, which shows balance shares as well as transactions during a specific period. It is a simple and convenient way of owning, maintaining, and transferring your securities without the risk of loss or damage of important documents.
How to Open Demat Account
If you are interested in trading or like to invest in different financial products, having a demat account is necessary for a seamless experience. Luckily, the process of opening one is easy. All you have to do is follow these steps:
- Get in touch with a depository participant (DP) and complete the account opening form. The two DPs available in India are NSDL and CDSL.
- Attach the form with the necessary documents and a recent passport size photograph for verification. Documents will include identity and address proofs.
- Sign an agreement with the DP, which will provide you with the list of rules and regulations, terms and conditions, as well as rights and duties of being an investor. The DP will give you a copy of said agreement along with charges for the same.
- A member of the DP will get in touch with you for in-person verification of the details written on the form.
- Once verified, your application will be processed, following which you will receive an account number and client ID. Using the specified details, you can start accessing your demat account.
This recent surge in the number of demat accounts opened by Indians is indicative of the gradual shift investors are making from physical assets like gold and property to security assets like bonds and stocks. Such direct investments in equities is a positive sign that the market scenario has steadily improved in the last decade. Financial experts predict that investors’ interest in equity markets will continue to rise, which means it is the perfect time for you to open a demat account of your own.