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Equity | January 08
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Crucial Things to Know Before Opening a Demat Account

The world of stock trading can be scary and confusing for many of us, given its set of unique terminologies and protocols. However, once you pass that barrier and navigate the market seas with confidence backed by knowledge, you can accumulate significant wealth over a short time.

One of the first things you would need to understand and have for success is a Demat account. For the uninitiated, a dematerialized or a demat trading account can be defined in simple terms as an electronic account required to hold shares, stocks, bonds or other securities.

Why is it important, what should you know before opening one and which is the best demat account India? Let''''''''s find out below.

Why are they important?

Well, in India you would require a demat trading account to trade and hold financial securities like bonds, derivatives, equities and ETFs. You do not necessarily need one to hold your mutual funds though.

Unlike a few decades ago, you can not hold share certificates physically today. Thus, a demat also acts as a statement of your transactions and electronic repository of your trading data.

Two statutory bodies in India - CSDL and NSDL, are the custodian of demat accounts, primarily charged with the responsibility of ensuring transparency and integrity in share trading.

Types of Demat accounts

Based on the investor''''''''s profile, Demat accounts can be categorised into three different categories.

  • Regular Demat: This is an account that residents of India use when they want to invest in stocks, bonds, ETFs etc.

  • Repatriable Demat: This is required for trading if you are a non-resident Indian (NRI) and hold a non-resident external bank account in India.

Non-repatriable Demat: This is also available to NRIs; however, requires linking to a non-resident ordinary (NRO) bank account. There is also another catch - transferring funds overseas is not possible with this account type.

What should you know before opening one?

SEBI is a regulatory body in India that monitors and controls the country''''''''s capital and securities market. SEBI also provides detailed, step-by-step guidelines on the demat account opening procedure; however, in this digital age, like other accounts, demat set-up is also best done online.

Note that your broker should be registered with SEBI to provide demat, trading and other similar services.

Documents required

Although a standardized set of documents, as set by SEBI is required for this procedure, many companies have digitized this process through the online submission and video verification.

A pan card, address proof, proof of identity and evidence of income are standard requirements. India''''''''s top brokers provide online documentation, verification and electronic KYC services so your account gets opened most easily and quickly.

The right broker

While there are hundreds of brokers which offer lucrative deals on opening demat accounts, your choice should be based on careful evaluation on certain parameters.

A broker facilitates your sale and purchase of stocks through the Demat account. Primarily, there are two types of brokers.

Discount broker

Opt for opening demat accounts with discount brokers if you want to trade stocks, futures and options. These brokerage firms just carry out your commands regarding derivatives and equity trade and do not offer many additional services.

Full-service broker

Full-service brokerage firms provide a host of other trading options besides derivatives and equities. If you choose such a firm, you can trade in currencies, IPOs, commodities and a lot more.

Also, most top-notch brokerage services in India have dedicated research teams that prepare comprehensive technical analysis reports and share them with their clients to ensure their success.


A very crucial element to consider before selecting a broker is fees associated with their services. A lot of them tempt potential clients with zero account opening charges but often have high brokerage commissions. Make sure you compare their fees for multiple trading segments against one another.

Some of them offer packages wherein you pay a varying amount as fees in correlation to the volume of your trades.

 Trading platforms

Trading platforms which are stable and offer consistent, seamless performance are highly beneficial to the trader, especially for intra-day trading. Every top-notch broker in India provides its web-based online platforms and mobile applications for an enhanced trading experience.

It would be wise to read customer reviews and app rankings for these platforms before settling for a broker. A platform that is reliable and easy to use should be the preference of both pro and novice traders - it ensures you waste no time in executing trades.

Other features

A lot of other features might be insignificant to the actual trading activity but are added advantages that you can look for, before opening an account.

Nominee feature

In the unfortunate case of your demise, all the investments you held are transferred to a nominee you selected initially. It is a good idea to bring your close family members on board with your investment plans so they are on the same page in case the situation arises.

Help & support

Things do not always go the way we plan and hence, it is always good to know you have someone to assist. There are over 500 brokers in India and this is one of the key aspects that separate the good from the poor - a great back end support team that gets on a phone or chat conversation with you to resolve your trading issues, whether technical or otherwise.

The best Demat account

Now the million-dollar question - which is the best Demat account and broker in India?

While there can not be one best demat account India, because traders have different preferences and requirements,  however, the broker you select largely influences your future success with trading and Demat. The variations in choice also stem from factors such as the trader''''''''s experience in the market and risk-taking capabilities. For instance, a novice trader could prefer a broker that though charges a higher overall fee, but provides peace of mind with training and hand-holding during the first few trades. However,  a well-experienced day-trader might like a simple and cheap service provider that allows him the flexibility to do what he likes, when he likes, without much intervention.
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