In India, shares and securities are held electronically in a dematerialized (or "Demat") account, instead of the investor taking physical possession of certificates. A Dematerialized account is opened by the investor while registering with an investment broker (or sub-broker). The Dematerialized account number is quoted for all transactions to enable electronic settlements of trades to take place. Every shareholder will have a Dematerialized account for the purpose of transacting shares.

Access to the Dematerialized account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the Dematerialized account are automatically made once transactions are confirmed and completed.

The bonus / right shares allotted to the investor will be immediately credited into his account. There is no risk due to loss on account of fire, theft or mutilation. Transaction costs are usually lower than that in the physical segment. A Demat account also helps avoid problems typically associated with physical share certificates. For example, delivery failures caused by signature mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks associated with forgery and due to damaged stock certificates. Demat account holders also avoid stamp duty (as against 0.5 per cent payable on physical shares) and filling up of transfer deeds. The biggest advantage of having Demat account is that you don't have to pay for stamp since these are electronically stored which reduces the transaction cost.

Finapian Investment Services is associated with some of the leading broking companies for providing Demat Services to its clients, where we help you understand the way into the market.