A Guide to Buying and Selling Shares Through a Demat Account

Navigating the world of stock trading can be daunting for newcomers, but with the advent of Demat accounts, the process has become significantly more accessible and efficient. A Demat account, short for “dematerialised account,” is a digital repository for your shares and securities, eliminating the need for physical certificates and streamlining transactions. 

This blog will give you an idea of how to purchase and sell shares through a Demat account.

Understanding Demat Accounts

A Demat account is essentially a digital account that holds your securities in an electronic format, providing a secure and efficient way to manage assets in the stock market. However, to buy or sell shares, you also need a trading account to execute transactions.

You can think of it as a virtual locker for your investments, safeguarding your securities from risks such as loss or damage, which are common with physical certificates. By eliminating the need for paper-based documentation, it streamlines stock market operations. If you wish to trade on stock exchanges, opening a Demat account is a mandatory first step.

What is the Process to Open a Demat Account?

Opening a Demat account is the beginning of your journey in digital stock trading. Knowing how to buy shares through Demat account is crucial for your success. Here is a guide you can follow to open a Demat account:

1. Select a DP: Opt for a trustworthy Depository Participant for seamless management of your account. 
2. Finish KYC formalities: Provide the necessary documents to secure your account and comply with the requirements. 
3. Add Fund and Link: Adding funds and linking trading accounts ensures a smooth transaction.
4. Learn How to Trade: Learning about various platforms and their features will improve your prospects in trading.

Easy Steps to Buy Shares in a Demat Account

Always remember that knowing how to purchase shares using Demat account is crucial for effective portfolio management. Here is a step-by-step guide you can follow to buy shares through a Demat account:

1. Access Your Broker’s Platform: Download your stockbroker’s app or visit their website to log in.
2. Explore Market Assets: After logging in successfully, take some time to review the available market assets, including stocks, index funds, mutual funds, and more.
3. Research Your Investment: If you decide to invest in shares of ABC Company, conduct thorough research about the company beforehand.
4. Fund Your Trading Account: To purchase shares of ABC Company, transfer the necessary funds from your bank account to your trading platform.
5. Place Your Order: Enter the number of shares you wish to buy, verify the total amount required, and place your order.
6. Check Order Status: After placing your order during trading hours, confirm whether the shares have been successfully delivered to your Demat account.

With an online Demat account, you can seize multiple trading opportunities and manage your holdings with just a few clicks in seconds!

The Process of Selling Shares in a Demat Account

There are several pieces of information available to teach you how to buy shares in a Demat account and very few to show how to sell them. Here are some steps that you can take to sell your shares through a Demat account:

   1. Determine the Right Time to Sell

Deciding when to sell your shares depends on your investment strategy and risk tolerance. It is natural to feel apprehensive during this process. However, it is important to keep your emotions in check and make decisions based on logic and analysis rather than fear or impulse.

    2. Select an Order Type

Before proceeding with the sale, you need to choose an order type that aligns with your goals. The purpose of selecting an order type is to minimise costs and reduce potential losses. Common order types include:

• Market Order: Sells at the current market price.
• Limit Order: Sets a specific price at which you want to sell.
• Stop-Loss Order: Automatically sells if the price drops to a predetermined level.
• Stop-Limit Order: Combines stop-loss and limit orders for greater control.

• 3. Complete the Trade Ticket

If you are selling through a broker, you will need to fill out a trade ticket to initiate the transaction. Once the order is executed, the proceeds from the sale are typically credited to your account within two business days. Completing the trade ticket ensures a smooth and efficient process.

Transferring Shares to Another Demat Account

Transferring shares from one Demat account to the other is nothing new and is practised among investors. However, you should start doing it after you have a basic idea of how to buy shares using Demat account. There are offline and online methods to transfer shares to another Demat account.

• Offline Method

These are steps that you can follow if you are opting for an offline mode to transfer shares from one Demat account to the other:

Step 1- Talk to your current stockbroker and collect a Delivery Instruction Slip (DIS). This slip contains the necessary details about the transfer. 

Step 2- Fillup the DIS and provide details like International Securities Identification Number (ISIN), Target Client ID and mode selection.

Step 3- After filling up the DIS, sign it and give it to the broker. They may charge you a small fee for the service.

Step 4- Receive the acknowledgement slip.

• Online Method

These are the steps that you can take for an online transfer of shares to a different Demat account:

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

Step 2- Provide the necessary information on the form and submit it.

Step 3- Give a copy of the form to your DP and it will be sent to the central depository.

Step 4- The authorities will verify your information, and you will get your login details within 1 to 2 days.

Step 5- After logging in, you can transfer shares from your Demat account according to your convenience.

Final Thoughts

Utilising a Demat account is essential for anyone looking to engage in the stock market. It simplifies the process of buying and selling shares by providing a secure electronic platform for managing your investments. Understanding how to purchase shares through Demat account empowers you to take control of your investment strategy. With the right knowledge of market conditions, order types, and timing, you can optimise your trading experience. 

Looking forward to buying shares? Open a FREE Demat account in Torus Digital with zero annual maintenance charges!

Frequently Asked Questions

• Do I need a trading account along with a Demat account?

Yes, to buy and sell shares, you must have both a trading account and a Demat account. The trading account is used to execute buy and sell orders, while the Demat account stores the securities.

• How do I open a Demat account?

You can open a Demat account online through a broker by providing necessary documents such as your PAN card, proof of address, and identity verification documents.

• Is there a minimum balance requirement for a Demat account?

No, there is generally no minimum balance requirement for holding shares in a Demat account. You can start trading without needing to maintain a specific amount.

• How do I purchase shares through my Demat account?

To buy shares, log in to your trading platform, select the stocks you wish to purchase, fund your trading account, and place an order. The shares will then be credited to your Demat account.