Demat account is very similar to a bank account. It is just like the entry that you make on your passbook for bank balance which is not held physically. The same way securities are stored in a dematerialised or an electronic form and credited or debited.
In accordance with the Securities and Exchange Board of India, you cannot buy or sell shares physically at any of the exchanges. The share certificates that were used previously are no more valid and not permissible for trading. Therefore, demat shares can only be bought or sold through the Bombay Stock Exchange or the National Stock Exchange.
So how does a Demat account work? If you have bought some shares, the broker will credit your demat account with those shares which will then reflect in your statement. However, if you have an online trading account, you can readily view your shares online. Usually, the broker follows T+2. i.e. trading day and 2 days post that to credit the shares.
If you sell your shares physically, you will be required to give an instruction note to your broker and then fill in the details of the various stocks. Your account will then be debited with the shares after which you will be paid the amount for the respective shares sold. However, if you have done it online, there will be automatic debit of shares. Even the amount will be automatically credited to your account.
Therefore, opening demat account online is far more convenient than dealing in physical shares. Besides, more and more traders are becoming aware of its merits. It is an absolutely hassle-free process where you do not have to be dependent on a third person for your day to day trading activities. Irrespective of where you are, you can keep a track of your shares online. All you need is a laptop, a good internet connection, and of course, electricity!
watch this video on How to open an Demat Account