You must open demat and trading account, if you want to start trading and investing in the stock market.
Demat account is a dematerialized account and used to store shares in the electronic form. Before demat account was introduced, shares used to be stored in the physical form. There are chances of physical shares getting lost, sold or forged. Demat account does not have such problems. You can also store mutual funds, debentures and exchange-traded funds (ETFs) in your demat account.
What is a trading account?
A trading account is used to buy and sell shares. It is an intermediary between the bank account and demat account. The money will be transferred from the bank account to the trading account. The trading account will be used to buy shares and the shares bought, will be stored in the demat account. If you want to sell the share, it will be removed from the demat account and sent to the trading account. Once the shares are sold in the stock market, the money will be transferred to the bank account.
1. Select a suitable Depository Participant
The first step towards opening a demat and trading account is, you have to select a suitable Depository Participant. Depository Participant can be a stockbroker or bank. You should be very careful while selecting a Depository Participant and make sure he fulfills all the necessary criteria and matches your requirements. Your Depository Participant should be able to take your orders in a timely manner, as time is very important in the stock market.
You must fulfill all the KYC formalities to register yourself with the Depository Participant and open the demat and trading account. KYC formalities required to be done are submitting duly filled application form, along with the copies of required identity proofs.
You must submit any one of the identity proofs mentioned below
You must submit any one of the address proofs mentioned below
After you submit your duly filled application along with the KYC documents, you have to visit the Depository Participant's office to verify the authenticity of the KYC.