Is Demat account a must for investing in equities? All you should know

If are you planning to 'buy' and 'sell' in equity shares, you need to open a demat account, as per the norms of market regulator Sebi.

Demat account is a dematerialized account that provides the facility of holding shares and securities in electronic format.

Generally, a company listed on stock exchanges is under the obligation to offer the securities in both physical and dematerialised form.

But to invest in equity shares, the demat account is considered to be the necessary tool as elimination of physical certificates for these assets was closed from the year 2000.

As both Sensex and Nifty benchmarks have touched new highs indicating optimistic future ahead, investors therefore would be more keen on investments in equity shares.

So, if you are planning to make investment in equity share, here's a list of few facts related to demat account.

According to Angel Broking firm, through this account, investors can transfer their holding through a delivery instruction slip (DIS) or receipt instruction slip (RIS) for buying or selling shares. These slips allow users to provide all the details that are required for executing a transaction smoothly.

Demat account holders can provide instructions to their depository participant (DP) to convert physical certificates into electronic form. Alternatively, electronic securities can also be reconverted to physical form, if required.

Depository participant (DP) is usually a broker or agent that interfaces with the bank.

A holder can freeze his accounts for a certain period, if required. This option can be beneficial if one wants to prevent unexpected debit or credit into one’s demat account.

This freezing option is also available for a specific quantity of securities held in the account.

As these accounts are operated electronically, it means these can be accessed using multiple modes. These accounts can be accessed through the internet using a computer, smartphone, or other smart devices.

Also, the National Securities Depository Limited (NSDL) enables users to send instruction slips electronically instead of physically submitting the slip to the DP. This makes the procedure more convenient and less time-consuming.

Another major benefit of having a demat account is that when a company is offering dividends, refunds, or interest to investors, these benefits are automatically made available to the account holders.

Also, corporate actions like bonus issues, right shares, or stock split are also automatically updated in the demat account of all the shareholders.

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