17 crore demat accounts and you are still missing out

Summary

India now ranks 9th globally with over 17 crore active Demat accounts. Still:

• Only 8% of the population has them
• 87% don't invest in the stock market at all

If you are one of those 87%, then you may never be rich. People are slowly realising this, and stock market participation is rising! So far, in 2024, 3.18 crore new accounts have been opened, surpassing last year's total. This article discusses why you should get a Demat account immediately, its benefits, and how you can choose one that fits you best!

Gold and Fixed Deposits (FDs) may seem safe investment options. However, if you do not invest in the stock market, you could be missing out on 200% returns. In the past 6 months, various stocks and indices have given returns ranging from 14% to 277%.

Lately, people have started recognising the stock market's potential. The number of demat accounts has grown exponentially from 39 lahks in FY2013-14 to 399 lahks in FY2023-24. The infographic below shows the rise in the number of demat accounts for the past 10 years. However, only about 3% of Indians participate in the stock market.

There are many reasons to open a Demat account. If the growing number of Demat accounts and potential returns don't convince you, here's another fact that might!

Did you know that you are essentially losing money on FDs and endowment plans? These instruments only generate about 4-6% returns. Considering inflation, you could lose over ₹14 lakh on an investment of ₹50 lakh in 10 years!

That's why you need a Demat account today; to take advantage of the stock market and grow your wealth. Before you open one, there are certain things you must know, such as what a Demat account is and the advantages it provides.

However, choosing one can be quite difficult with so many different options out there. But worry not! At Finology Select, you’ll find the top brokers with their features, benefits, comparisons and everything else you need to make the right choice.

What is a Demat Account?

It is short for "dematerialised account”. Think of it as a digital bank account for your investments. You need one to buy/sell stocks. Like a bank account keeps your money safe, a Demat account keeps your stocks and securities safe in a digital format.

Initially, shares were held in the form of physical certificates, which were prone to loss, damage, or theft. A Demat account emerged as the solution to these problems.

Now, if you want to open a Demat account, you need to approach a Depository Participant (DP). It may be a bank, Financial Institution (FI), or stockbroker registered with depositories like the National Securities Depository Limited (NSDL) or the Central Depository Services Limited (CDSL). It is similar to a middleman between you and the depository. When you buy or sell shares, the DP manages the flow by crediting or debiting your Demat account. It makes sure that you retain ownership of your shares.

What are the Benefits of a Demat Account?

Opening a Demat account comes with numerous advantages:

1. Stocks are stored electronically, eliminating any chances of loss or damage.
2. Easy tracking and management of investment via online platforms or mobile applications.
3. Transactions are settled within T+2 business days (two days after the date of trade). Faster transactions mean more liquidity.
4. Investors can nominate beneficiaries for their holdings. This means easy transfer of assets in case of unforeseen circumstances.
5. Securities held in a Demat account can be pledged as collateral for loans.
6. Dividend earnings are credited to the investor's account automatically.

FDs can earn an interest between 3.50% - 7.80%. However, in 2023, the Nifty 50 gave 20% returns, and the Sensex gave over 18% returns. Without a Demat account, you will be stuck with meagre returns and will never be able to create wealth.

How to Open a Demat Account?

Here's a simple step-by-step guide to opening a Demat account:

1. Choose a Broker: You can consider various brokers offering Demat account services. You can find reliable brokers such as Groww, Zerodha, Angel One, and 22 others on Finology Select.

2. Choose Account Type: There are two types of Demat accounts:

1. Regular Account: Provides a varied range of services, such as trading and investment in various securities, such as equities, bonds, and mutual funds.
2. Basic Services Account: A limited range of services suitable for holding debt and government securities.

3. Document Submission: Typically, the required documents include:

• Account Opening Form: Collects basic personal information, contact details, and preferences
• Permanent Account Number (PAN) Card: A copy of the PAN card for KYC (Know Your Customer) verification
• Identity Proof: Such as an Aadhaar card, passport, voter ID, or driver's license
• Address Proof: Can be verified using an Aadhaar card, passport, utility bills, or bank statements
• Passport-size Photographs: Generally, a digital copy of the recent photo is required
• Bank Account Proof: A cancelled cheque or bank statement to link the Demat account with the investor's bank account

4. KYC Verification: The DP carries out this step, ensuring compliance with regulatory requirements

5. In-person Verification: This can be done via a video call or by visiting the DP's office

6. Agreement Signing: An agreement or consent form outlining the terms and conditions of the Demat account and the services provided by the DP

7. Account Activation: The DP provides a unique Demat account number (similar to a bank account number) and other relevant account details

8. Commence Trading and/or Investing: Electronically buy, sell, hold, and manage investments through a trading platform

The Demat account opening process may vary from broker to broker. Finology Select provides detailed guides on how to open a Demat account with 20+ brokers with images, simplifying the entire process.

Top 10 Demat Accounts in India

Here is a list of some of the most prominent brokers in India:

Compare their various offerings, features and charges and those of 15 more brokers on Finology Select! But what to do if you have already chosen a broker and want to switch? Well, you can change brokers easily!

How to Transfer Shares from One Demat Account to Another?

There are multiple reasons to transfer shares from one Demat account to another. It may be to switch to a broker offering better services or lower fees or simply move your shares to a family member's account. It can be done in two ways:

Offline Method

Step 1: Ask your current broker for a Delivery Instruction Slip (DIS), it contains all the necessary details needed for the transfer.

Step 2: Fill in the following details:

1. International Securities Identification Number (ISIN)
2. Quantity of Shares
3. Target Client ID
4. Choose the off-market transfer mode or inter-depository option

Step 3: Sign the document and give it to your current broker.

Step 4: Investors may need to pay a fee for the transfer.

Step 4: Collect the acknowledgement slip.

Consequently, the shares will be transferred within 3-5 days.

Online Method

Step 1: Visit the CDSL or NSDL website and sign up for the ‘Easiest’ or ‘Speed-e’ facility.

Step 2: Fill in all the required details and submit the form.

Step 3: Provide a copy of the form to your DP, which will then send it to the central depository.

Step 4: Relevant authorities will verify your information, and you will receive your login details within 1 to 2 days.

Now, you can transfer stocks from your demat account whenever you want.

Conclusion

Nearly 3.10 crore fresh Demat accounts were opened in 2023 and 3.18 crore in 2024. Having a Demat account has become a necessity for wealth creation. Without a Demat account, you can’t invest in the stock market or earn high returns.

More investors are recognising how important a Demat account is to their investment strategy. The financial markets are now almost completely digital, and in this scenario, having a reliable platform to find broker information can help your investment experience.

Opening a Demat account may be a complex procedure, but it does not have to be difficult. With the right guide, like Finology Select, it's as easy as pie.

Disclaimer: This article is sponsored content. The inputs and details accounted for in the article do not necessarily reflect the views of Mint, and Mint does not endorse or assume any responsibility for the information provided. Investing in stock markets involve financial risks, take expert advice before investing.