How to Use Demat Account and Buy Shares

How to Use Demat Account and Buy Shares

How to Use Demat account and Buy Shares

Can one buy shares directly into the demat account? Obviously, you cannot do so in the secondary markets, but we come back to that later. Let us start off with what is demat account and the use of demat account for investors. We then cover how to use demat account and what is use of demat account. At an operational level, we shall also look at how to work demat account and how to operate demat account from a practical perspective.

The purpose of demat account is to maintain your stocks and other securities in demat or electronic (non-physical) form. Having understood what is the purpose of demat account, we will get down to the actual process flows. We will cover how to buy shares through demat which is one of the main reasons that demat account us used for. Having understood how to purchase shares through demat, we move to the online demat aspects of demat buying.

Apart from understanding how does demat account work, we shall also look at how to use demat account for trading purposes and also the nuances of how to operate demat account online. The focus here is on how to buy and sell shares using the demat account.

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Table of Content

  1. How to Use Demat account and Buy Shares
  2. What is a Demat Account and how to buy shares into demat account?
  3. Steps to buying shares via demat account
  4. How to enhance your demat account trading experience?

What is a Demat Account and how to buy shares into demat account?

This is the fundamental starting point. Demat or Dematerialized account is an electronic account that stores the shares you buy through the NSE or BSE in an electronic or digital form. Demat does away with the need to hold physical share certificates. Ownership, transfer, transmission, clearing and settlement of shares is all done in demat format only. In India, Demat accounts are maintained by Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL) and executed through various DPs.

Can you buy shares and securities directly into demat account? Here are few things to know.

  1. In the case of non-market related securities like bonds, gold bonds, debentures etc, you have to mention at the time of application that you need the securities in demat form. Accordingly, they will be directly credited to your demat account.
  2. In the case of IPO, allotment only happens in demat form. Hence for applying in an IPO, having a demat account is mandatory and that has to be mentioned in the application. The registrar to the IPO will only allot shares online in demat form.
  3. What about secondary market purchases. Here you need a trading account too. For instance, if you want to buy stocks or ETFs in the secondary market, you must have execute such transactions in the trading account. The trading account is automatically linked to the demat account at the back end and the purchased shares will automatically go into the demat account on T+2 day. The same applies for selling and investors must note here that even in the case of IPO, for selling shares  you can only do it through trading account. Only IPO application can be made only with demat account.

Steps to buying shares via demat account

As stated earlier, demat account is now mandatory in India if you want to transact in shares. Even if you are holding physical shares, you cannot sell them unless these are dematerialized in your name. However, before you buy shares in the demat account, there are certain preparatory steps required. Only after you go through these steps, you can actively use your demat account.

  1. The first thing you need to ensure is that you have an Income Tax PAN card. You cannot open a demat account without a PAN card. If you don’t have a PAN card, you can apply for a PAN card using form 49 at the Income Tax website and the card comes to you in less than 15 days. Alternatively, you can also apply for demat with your Form 49 copy and then give the demat account details once the number is allotted. However, you cannot start trading shares till your PAN is allotted to you. Indian government has made it mandatory to quote PAN for all financial transactions. PAN tracks your transactions which is captured by the income tax. PAN card is must for demat account opening activation.
  2. The next step is to open Demat Account and Online Trading Account. You can open demat account with a DP and a trading account with a SEBI registered broker. Ideally, keep the trading account and demat account with the same broker for simplicity and smooth logistics. Normally, the broker will facilitate smooth processing of Demat and trading account opening. You then don’t have to worry about DIS delays etc. The intent of the online trading account is to enable you to buy or sell shares both online and offline via phone calls. The trading account transactions entail brokerage costs and statutory charges which are billed and reflected in the contract note.
  3. Ensure a seamless link between your trading account, demat account and bank account. Here is how a seamless link will work. When you buy shares, the amount has to be either pre-funded or it has to be paid out by T+1 date. On T+2 day, subject to full payment realization, the Trading Member will transfer shares into your demat account. The situation is the reverse when you sell. When you sell shares, the demat account gets debited on the same day or the next day. You can issue online DIS with power of attorney to broker or you can use the authentication system offered by NSDL and CDSL. Once the demat debit is approved, the funds will come into your bank account seamlessly on T+2 day. Linking your bank account also ensures that you get dividends easily into your bank account.
  4. Activate online trading and start putting in trades. It is much easier to trade online as you have full control over the order process and you don’t have to depend on the broker or dealer to execute. You can also put margins and trade intraday or in futures and options depending on your choice. Remember, share purchases and sales in the secondary market are never done directly in the demat account. It is executed through the trading account, which his linked to the demat account. 
    Click here to know about if shares not reflecting in demat account.

How to enhance your demat account trading experience?

Having opened a demat account, you need to make it work for you really hard. Here is what you can do. Always check contract notes with the Demat account statement to look for discrepancies. Click here to know what is Demat Account Holding Statement. Avoid letting your account balance be at zero for too long as it can lead to freezing of demat account. Then you need to go through the process of unfreezing it. Of course, make it a point to freeze your demat account, if you are likely to remain out of India for a long time. These are just safety measures.


Understanding the meaning of a Demat account is crucial for modern investors, as it represents the digital transformation of securities, providing a secure and convenient way to hold and manage investments in electronic form. Overall, a Demat account streamlines the process of securities trading and investment, making it more efficient and secure. As technology continues to advance, the importance of digitising financial assets becomes even more evident. Now you can supercharge your trading journey with blinkX trading app, offering a seamless interface, advanced analytical tools and real-time market data. 

FAQs on Use of Demat account to buy shares

Your Demat account is used to hold shares & store these shares in electronic form. You can benefit from this simple & quick investment by using a Demat account.

Yes, it is quite important to use a Demat account for trading in the stock market. You can invest in multiple types of investment instruments in the stock market.

To withdraw money you need to log in to your brokerage account, click on account, check balance & simply click on withdraw. The following amount will be added on your linked bank account.