Why Every Investor Needs a Demat Account: Key Benefits and Future Trends

It's 2024, and we are witnessing a rise in the Indian stock markets like never before. With the Nifty 50 touching an all-time high and the Sensex reaching 77k, more and more investors are showing interest in the stock markets. The current surge in stock market performance could fetch you good long-term benefits. Stock market investments are like seeds that you have to sow now to reap benefits in the future. But, to participate in the stock markets, you must first get yourself a Demat account.

Let’s understand why having a Demat account is essential and what it can offer you.

Why is a Demat Account Essential

A Demat or Dematerialised account is where you can hold your shares and securities in electronic format. Think of it as a digital locker for your investments.

When you buy shares, they are credited to your Demat account, and when you sell shares, they are debited from your account. This seamless electronic process is managed by depositories like the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) in India.

Apart from the fact that SEBI (Securities and Exchange Board of India) has mandated the use of a Demat account for trading stocks, it offers convenient and secured management of your investments. Moreover, it eliminates the risks of physical paperwork and gives you a clear overview of all your investments in one place.

Seamless and Convenient Transactions

Let's see how a Demat account works with the help of an example.

Suppose you want to buy 10 shares of Reliance Industries. You log into your Demat account with Sharekhan. As a first step, your order is sent to the stock exchange. It could be the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).

Here, your buy order is matched with a sell order of the same quantity and price. Once matched, the trade is executed and you receive a trade confirmation from your broker. This confirmation details the number of shares bought, the price, and the total transaction cost, including brokerage fees and other charges.

The settlement process for stocks is T+2 days, meaning the transaction is settled within two business days from the time you place the order. During this period, the shares are transferred from the seller’s Demat account to your Demat account. Once settled, you can see the shares in your Demat account, ready for future transactions.

Benefits of Using a Demat Account

As per SEBI norms, having a Demat account is mandatory if you want to trade or invest in the stock markets. All physical share certificates must be converted into electronic form (dematerialization) to transfer them. This is because, as of April 2019, SEBI has banned the transfer of physical shares using a transfer deed.

Let's talk about some of the benefits you can avail by opening a Demat account:

1. Storage of multiple kinds of investments: A Demat account opens doors to multiple investment opportunities for you. You get to easily invest in various types of securities like shares, bonds, and mutual funds, all in one place.

For example, you could buy shares of TCS and also invest in Government bonds. At the same time, you can further diversify your investment portfolio by buying mutual fund units, all within the same Demat account.

1. Easy tracking of the investment: Demat account allows you to easily monitor your investments and track their performance. If you open a Demat account with Sharekhan, monitoring becomes simpler as the platform. Also, the platform offers real-time data, which allows you to make faster decisions. Moreover, you can get access to stock charts, pricing details, company news, and more information to carry out research before investing.
2. Safe and secure: Storing securities electronically, is much safer than keeping physical certificates.
3. Faster transactions: Demat account enables faster trading of shares and securities. Meaning shares are instantly transferred on the stock exchange with quick settlement.

Future Trends

Many new trends are coming up around Demat accounts. This is primarily driven by the introduction of cutting-edge technologies such as artificial intelligence (AI) and machine learning (ML) that are likely to make investing more secure, transparent, and accessible to everyone.

AI is a smart machine that can think, learn and make decisions like humans. ML allows these machines to learn from their experiences and get better over time.

In the context of Demat accounts and investments, imagine AI-driven chatbots that assist you 24/7 with your investment queries. These smart assistants can provide personalised advice, helping you make informed decisions. For instance, if you're unsure about buying a particular stock, an AI chatbot can analyse market trends and give you real-time recommendations.

Machine learning can enhance security by detecting unusual activities in your account, ensuring your investments are always protected. It also helps in analysing vast amounts of market data to predict trends and opportunities, making it easier for you to make profitable investment decisions.

If you want to benefit from the growth momentum demonstrated by the Indian stock markets, you must get a Demat account. With AI and ML revolutionising the investment landscape, now is the perfect time to capitalise on the stock markets.  

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