Demat Account
A Demat (dematerialised) Account holds securities such as shares, mutual funds, ETFs, bonds, and SGBs in electronic form. Opening a Demat Account is mandatory for trading or investing in listed Indian securities.
Understanding Demat Account
Until the 1990s, shares were issued as physical certificates that had to be transferred manually — a slow and fraud-prone process. Dematerialisation, mandated by SEBI in stages from 1996, converted these into electronic balances held by depositories. Trading in physical shares is now effectively impossible for listed companies.
The Demat Account is paired with a Trading Account (which executes orders on the exchange) and a Bank Account (which settles cash). Most brokers offer all three as a bundled "3-in-1" account, especially bank-affiliated brokers like ICICI Direct, HDFC Securities, and Kotak Securities.
Why it matters
Choice of broker — and therefore Demat provider — directly affects your investing costs. Discount brokers (Zerodha, Groww) charge ₹20 or less per equity-delivery trade and ₹0–300 AMC. Full-service brokers (ICICI Direct, HDFC Securities) charge 0.3–0.5% of trade value and ₹500+ AMC. For long-term investors, this 5–10x cost difference can mean ₹50,000+ saved over a decade on a moderately active portfolio.
Example
You buy 100 shares of HDFC Bank through your Zerodha account. The order executes on NSE; T+1 settlement transfers the shares from the seller's Demat Account to yours, and ₹1.7 lakh moves from your bank account to the seller via the clearing corporation. You see the 100 shares in your Demat holdings the next trading day.
You buy 100 shares of HDFC Bank through your Zerodha account. The order executes on NSE; T+1 settlement transfers the shares from the seller's Demat Account to yours, and ₹1.7 lakh moves from your bank account to the seller via the clearing corporation. You see the 100 shares in your Demat holdings the next trading day.