Why is it Necessary to Open Demat Account Before Investing in Stock Market?

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Why is it Necessary to Open Demat Account Before Investing in Stock Market?

A Demat account is a necessity before you start investing in the stock market because this is the account that holds all your purchased shares in the online form. In India, you are not allowed to keep the share certificates in the physical form. 

You can open Demat account online in a few simple steps anytime and anywhere using your smartphone. In this blog, you’ll get to know the importance of opening a Demat account. 

Open Demat Account Online: Importance

A Demat account is like your bank account because, in a bank account, you can safely keep your money. In a similar way, you can hold your purchased shares safely in a Demat account. 

Here are the main reasons why you should open a Demat account which is a mandatory requirement set by SEBI (Securities and Exchange Board of India): 

  1. Shares Holding and Managing

Demat accounts were first started in India in 1996. Earlier, share certificates were held in a physical form which was at high risk of loss or theft. Today, these physical certificates are no longer issued and you can completely safeguard yourself from all the issues such as loss, theft, forgery, etc. by opening a Demat account. 

You can hold as many shares as you want to do in a single Demat account. You can keep track of all your stocks right in the palm of your hand and manage your complete portfolio. 

2. Provides Seamless Experience

Once you open Demat account online, the buying or selling of shares can be executed with a few clicks which helps in saving time. This increases the liquidity and you can receive the funds directly into your linked bank account by placing a sell order from the trading cum Demat account. 

Once you buy the shares, they will get credited to your Demat account following the settlement cycle of T+1 day. Also, you can directly get dividends, bonuses, refunds, etc. on your Demat account. 

3. Lower Cost

With physical share certificates, you had to pay different charges such as stamp duty, handling charges, etc. After the introduction of the Demat account, these costs get reduced or eliminated as you are not required to pay any stamp duty while transferring shares. 

Nowadays, stockbrokers also provide great offers like no AMC (Annual Maintenance Charges), no account opening charges, etc. 

4. Different Accounts and Instruments 

Apart from opening a Demat account as an individual, you can also open a HUF Demat account and a corporate Demat account. This will help you invest in the stock market as a business entity and enjoy separate tax exemptions. 

You can also hold different instruments in a single Demat account including shares, mutual funds, ETFs, G-Secs, bonds, etc. Hence, you can manage your diversified portfolio right in one app. 


Opening a Demat account is not just a choice but it is a mandatory requirement to hold the shares. You can manage all your shares, and buy and sell shares instantaneously with the help of a Demat account. This account will attract lower charges and you can also hold various instruments in a single account. 

If you want to open Demat account online for free, then you can open an account with Dhan by downloading the app or on the platform. 

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