The term “Demat account” is used to refer to a document that is used to transfer ownership of shares, debentures, or other securities in a company. Demat was a name given to an account held by companies in India. It was the successor to the Dematerialized stocks. A Demat account is a type of account where the securities (in the case of stocks) and debentures (in the case of bonds) are kept without physical possession and are electronically recorded and transferred in the form of digital transactions. It is often confused with the electronic transfer information system.
Why are Demat Accounts Confused With the Electronic Information System?
Demat account first emerged as an electronic system for recording securities trades and equities transfers. This invention came about due to the development of computer technology and the spread of the internet.
Evolution of a Demat Account
Dematerialization of a paper-based system to one purely based on electronic technology is a remarkable achievement. The concept of a Demat account was first introduced in India in 1884 by Sir William Muir, who was then the Indian Civil Service chief of the Supreme Court. He was the first person to propose the idea of
Dematerialization of stock ownership, making it possible for stocks to be traded through the mail.
Demat accounts came into existence first in India in the 1990s. The idea of Demat accounts or Dematerialized accounts came about due to India’s economic reforms, which encouraged greater financial transparency and competition in the financial sector. It was a means of trading in stocks, bonds, debentures, mutual funds, and similar financial instruments more quickly and efficiently.
The concept of a Demat account is a stock market transaction. It is done through the Electronic Transfer Information System. It was created in the year 1999.
All the shareholders own it. Many Indian investors used to register their companies’ shares in a Dematerialized state in the past.
This Dematerialized account is helpful for the transfer of shares between investors. A Demat account is an electronic account holding stocks and securities. The concept of a Demat account was used in the UK in the 1990s before it was popularised in India in the 2000s with the National Stock Holding Companies (NSHC) program launch.
The Demat account is a very effective way to trade securities. It means that there is no need to store physical securities, and it is one of the easiest and most secure ways to sell or buy securities.
In 2005, the Government of India established a national e-governance project called “e-Demat.” It was an initiative of the Ministry of Finance which aimed to create the basic infrastructure to allow the creation of electronic Dematerialized accounts (e-Demats). In India, e-Demat was expected to address the following issues:
- increase the efficiency of tax collection and administration;
- improve information provision about the tax system;
- reduce corruption
Since the introduction of the electronic system (Demat account), there has been a rapid increase in transactions. The ability to trade securities electronically has become the primary feature of these accounts. The main objective of the Demat account is to ensure that the stock that a company has is accurately recorded both in the Demat and in the company’s books. As a result, the Demat account has evolved into a robust management and reporting system for the entire financial sector.
Today, it is the most widely used system for tracking the movement of securities in India and globally. So, If you have invested in the stock market, it makes sense to open a Demat account.
Why is Opening a Demat Account Important for Investing in the Stock Market?
Because opening the account will allow you to transfer securities from your Demat account to your bank account or any other financial institution. Opening this account is very easy, and you can open Demat account anytime and anywhere. As an investors you will use various indicators while you interpret charts. Afew indcatiors you wil come across are Put-Call ratio, Moving Average, MACD, Bollinger bands, Relative strength index, Fibonacci retracement, etc. With the help of these you can make profitable trading decisions. It is important to understand these indicators and open a Demat for investing in the Stock Market.
Opening a Demat Account in India is So Easy With IIFL
Dematerialized accounts initially came into existence for trading stocks and securities. It is possible to use a Demat account to manage any financial asset. You need to have a bank account or Demat account to open the same, which is a very secure way to transact in the stock market.
In India, it’s easy to open a Demat account. All you need is documents like:
- A bank account
- Pan Card
- A phone and a phone number linked with the bank account
- And of course the internet
The process starts by applying online for the Demat account.
- Go to the IIFL Securities website click on the lead form.
- Fill out the form to open a Demat account.
- Fill in the details ( bank account number and PAN Number)
- You will receive the OTP to verify KYC details. Submit OTP
- You have successfully opened a Demat account. Now,
- Download the IIFL Securities Online Trading App
- You are all set to start investing.