What it means
Shares are held with one of two depositories, NSDL or CDSL, through your broker. A demat account holds what you own, a trading account places the orders, and a linked bank account moves the money. Shares bought for delivery reach the demat account one working day after the trade.
In practice
Opening a demat account is the first step into the Indian market, and it is usually done online with a broker in a day or two using identity and bank details. The same account holds shares, exchange-traded funds, bonds and mutual fund units.
Holdings can be checked directly with the depository, independent of the broker, which is a useful safeguard: the depository sends its own statement of what you own.
What to watch for
Brokers charge a yearly maintenance fee and a small charge each time shares are sold from the account. Giving a broker or anyone else a broad power of attorney over the account is a risk; use the depository's own approval step for each sale instead.
Related terms
4 terms- BrokerThe company that gives you access to markets and sends your orders on for execution.
- Intraday and deliveryThe two ways to trade shares in India: intraday, where the position is closed the same day, and delivery, where the shares are paid for in full and kept.
- StockA small piece of ownership in a company, traded on an exchange.
- NSE and BSEIndia's two main stock exchanges: the National Stock Exchange, home of the Nifty 50, and the Bombay Stock Exchange, home of the Sensex.