After the pandemic crash of 2020, markets have seen an extraordinary rally. Most critics claim that this rally was due to retail investor participation, which has increased enormously in the Indian stock market. The data also depicts that.
The number of demat accounts opened in 2020 was the highest, when compared to the whole decade. The demat accounts opened in the year 2020 were approximately 5 million, which is a 23% (approx) rise from the last year. As per the data sourced from the Securities Exchange Board Of India (SEBI) total demat accounts at the end of the Fiscal year, 2020 stand at 50 million. A rise of approximately 15 million. During the end of 2019, total demat accounts were 36 million.
In March 2020, the indexes saw a steep correction. Steepest since the financial market crisis of 2009. This allowed the investors to buy quality companies at a cheaper valuation. This crash gave institutional investors the chance to accumulate stakes in quality companies at a cheaper valuation. However, it also helps retail investors in growing their wealth. The wealth accumulation in quality companies is a bullish signal for the retail segment and the overall economy.
Moreover, the ease of account opening has led to the boom in the retail segment. Now you can open a demat account digitally, that is without submitting any hard copy.
Procedure Of Opening Demat and Trading Account
Select A Depository Participant
A depository participant is a registered partner, of a depository that helps investors in starting their financial journey. The depositories appoint these institutions that store investor’s financial securities on behalf of the depository.
Depository participants hold financial instruments such as Government securities, Bonds, Equity shares, and many more in an electronic form. DPS are mediators, between the companies and the shareholders. They offer a lot of services, the most popularly used out of them are demat and trading accounts.
Therefore to open a demat and trading account you will have to choose a depository participant. Depository participants include brokers, banks, and other financial institutions.
The Digital Application Form
After choosing the broker you want to open your demat and trading account with. You can go on their website, and opt for opening a demat account. Once you have selected the option, you will be directed to an application form page. Where, you have to fill in all the address-related details, contact details, income details, bank account details, and PAN card details. Then choose the brokerage plan under your budget.
Transfer The Documents
Post successfully, filling the application form, you will need to upload the following documents to open a training account.
- Proof Of Address
- Income Proof
- Bank account details
- PAN card (Permanent Account Number)
- Income proof
While uploading these documents, some brokers might ask you to upload your selfie. However, post uploading these documents you have to wait for the response from the broker.
After you have successfully uploaded the documents, they go through a verification process. After the documents are verified, the broker will do an in-person verification. The in-person verification would be done via a video call or a pre-recorded video, where you will have to perform some activities that will be instructed on your screen.
Receive Login Credentials
Once you are done with all the above steps, you will receive login credentials for the trading platform. By logging in to the trading platform you will be able to buy and sell financial instruments.
Points To Focus On
Importance Of Demat Account
- Eliminates the risk of losing financial securities, forging of shares, and other kinds of frauds that used to take place in the traditional system.
- The demat account also provides more transparency than the old system. Investors can see live price fluctuations in the market on the trading platform.
- All the financial instruments are stored in one place. Therefore, you do not have to waste your time switching accounts for all the financial instruments.
Importance Of Trading Account
- A trading account is a platform that is used to purchase and sell financial securities from the exchange.
- An online trading account links the gap between trading and a bank account.
- The trading account’s servers are directly linked to the servers of all the exchanges such as Multi Commodity Exchange (MCX), National Stock Exchange (NSE), and Bombay Stock Exchange (BSE). Therefore, any change in the price is directly updated on your trading platform.
Thus, you will need a demat and trading account to begin trading in the Indian stock markets. An online demat to hold securities in the electronic format and trading platform to buy and sell those securities.
Also, choosing the right broker is very important for your financial journey. Therefore, spend your time on the stock market research and compare the brokers. Then choose one of the best under your budget.