AIJRRLSJM VOLUME 1, ISSUE 11 (2016, DECEMBER) (ISSN-2455-6602) ONLINE

ANVESHANA’S INTERNATIONAL JOURNAL OF RESEARCH IN REGIONAL STUDIES, LAW, SOCIAL

SCIENCES, JOURNALISM AND MANAGEMENT PRACTICES

PERFORMANCE OF DEMAT ACCOUNT AND ONLINE TRADING

S.NOOR AHAMAD M. SHEKSHAVALI C. MD. SANAULLA

Assistant Professor, P.G Student, Dept. of P.G Student, Dept. of
MBA, Department of Mgmt. Studies Gates Mgmt. Studies Gates
Management Studies, Institute of Technology Institute of Technology
Gates Institute of Email: Email:
Technology shaikshavali9030@gmail. [email protected]
com om

ABSTRACT
The commencement of E-Trading & Demat has transformed the capital market in India. With the help of Demat
& Trading account, buying and selling of shares has become a much faster and even process than trading with
the assistance of a physical broker. It provides for the equalization of bank, broker, stock exchange &
depository participants. This helps to get rid of the painstaking system of investing in stock exchange. Today, if
one wants to invest in stock market, he has to contact a broker on phone or meet him personally to place order.
A broker mainly gives such importance & additional service only to highnetworth customers. But the
commencement of Internet trading, even a common or a small investor gets an opportunity to avail the service
at an reasonably price which is much lesser than what is charged by a physical broker over the phone. Online
trading has given customer a present time access to account information, stock quotes elaborated market
research & interactive trading. The prerequisites of Internet trading are a computer, a modem & a telephone
connection, registration with broker, a bank a/c and depository account. The begin of depository service is
considered as the beginning of the trading of Stocks @ click i.e you can arrange delivery of scripts sold
anytime, anywhere to anyone by click of a mouse. Dematerialization facilitates to keep the securities in
electronic form in place of paper form. It offers more benefits than the physical certificate form. Despite the
benefits of Dematerialization, the awareness levels among the investors relating to Demat account is not
adequate because of numerous reasons. The investors are not sufficiently responsive of the concept of Demat
account & the various financial institutions providing such services.

Keywords: E-Trading, Demat Account, Stock Market, Depository Account, Online Trading, Dematerialization.

INTRODUCTION
Demat refers to a dematerialized account. Just as we have to open an account with a bank if
we want to save your money, make cheque payments etc., we need to open a demat account if
we want to buy or sell stocks. So it is just like a bank account where actual money is replaced
by shares. We have to approach the DPs (remember, they are like bank branches), to open our
demat account.
Demat account allows you to buy, sell and transact shares without the endless paperwork and
delays. It is also safe, secure and convenient.
Let's say our portfolio has 100 of Satyam, 50of Suzlon, 20 of ICICI BANK, 50 of Tech
Mahindra and 100 of TCS shares. All these will show in our demat account. So we don't have
to possess any physical certificates showing that us own these shares. They are all held
electronically in our account. As we buy and sell the shares, they are adjusted in our account.
Just like a bank passbook or statement, the DP will provide you with periodic statements of
holdings and transactions.
Individuals, companies, Trusts, Partnership firms, NRIs, HUF, Banks and Institutions are
allowed to open a depository account with any depository through a depository participant.
The investor would need to execute a standard form giving all his details, bank details,
instruction details, nomination details and off-course photograph and signature. Along with
this form, the investor would also have sign an agreement with the depository participant
which usually forms a standard part of the account opening process. The details on the form
have to be matched with a photocopy of the investor's passport, driving license etc. to certify

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the mentioned details. If the investor is an NRI, then the client will have to provide overseas
address, provide copy of RBI Approval, if any. The RBI Approval is not mandatory for
opening of a DP. Account but is required to receive shares into the account when purchased
through the secondary market

INDIAN E-BROKING SCENARIO

The Indian stock broking business has gone through a sea of changes. From that of a business
dominated by few individual players to institutional members, as did trading open outcry and
hidden deeds to screen best and transparency. India enters the cyber-trading era to equal the
current market trends taking into consideration the need to facilitate inflow of funds in the
capital market. The trading system will enable all categories of investors, resident and non-
resident Indian, to trade online. Online brokerage in India is still in its early days. Though the
trade through online broking is very miniscule compare to total trading, the signs are that it
will grow to 30%-35% in next few years.

EFFECT ON OFF-LINE BUSINESS

With the emergence of e-broking, which offers many benefits like, level playing filled to all
investors, comfort of the house, simplicity, low brokerage and value added services it could
be possible for some of the offline trade to shift to online trade. The proportion of online
broking business compare to off line broking is miniscule about less than 1%. The offline
player would not be affected unless the figure reaches a minimum of 8-10%. Online trade has
not started to eat the volumes of, off line business till now. But at the same time it has created
new set of clients for e.g., NRI‟s who were not very active in the market due to lack of
transparency and information, have moved to use this facility. Housewives are another new
category. Net savvy student‟s and retired persons are the next expected category. Depository
services-beginning of the era of stocks at click Today it is a practical reality that one can
arrange delivery of securities (shares) sold anytime, anywhere to anyone by a „click‟ of the
mouse and it is possible to trade in securities and settlement of the accounts from the
convenience of a sitting room or via a laptop. The depository is responsible to deliver and
receive securities trade at the stock exchange, which are the business partners of the
depository. It does not deal with financial aspect of the settlement of the trade.
Dematerialization of securities (shares) was the commencement of the era of stocks. The
beginning was made in 1996, with legislation of the depository act 1996 and SEBI
regulations 1996.

REASONS FOR ONLINE TRADING IN INDIA

Each investor has one or other reasons to go for online trading instead of offline trading.
They are as follows:
1. They are independent. They fell they have control over their account; can make their
own decisions and don‟t have to give reasons for their actions.
2. They have a reason to participate in the stock market and learn about it.
3. They find it interesting, cheap, easy, and fast and convenience.
4. A lot of information is online so they can keep up-to-date with what is happening in
the trading world.
5. They are sure and overconfident

REASONS FOR THE EMERGENCE OF ONLINE TRADING IN INDIA

The reasons for providing online trading facility to investors by the Indian companies are
various.

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They are as follows:

1. Online trading has a very good future in India as it is not exploited properly so far.
2. Consistent increase in the number of users of interest.
3. Consistent increase in the number of personal computer users.
4. Part of diversification.
5. Less investment in technology and other areas compared to the returns.
6. More awareness in investors about the stock market

PREOCESS OF DEMAT ACCOUNT AND ONLINE TRADING HOW TO OPEN AN

ONLINE TRADING ACCOUNT?
Just like the demat account; a trading account is a must for investing in the stock market. This
is because to trade in the stock markets, you need to be registered with the stock exchange.
Stock brokers are registered members of the exchanges. They traditionally conduct trades on
your behalf. Most often, stock broking firms have thousands of clients. It is not feasible to
take physical orders from every client on time. So, to make this process seamless, it is
advisable to open an online trading account. Using this trading account, you can place buy or
sell orders either online or phone, which will automatically be directed to the exchange

through the stock broker.

HERE’S HOW YOU OPEN A TRADING ACCOUNT:
 First, select the stock broker or firm. Ensure that the broker is good and will take your
orders in a timely manner. Remember, time is of utmost importance in the stock market. Even
a few minutes can change the market price of the stock. For this reason, ensure that you select
a good broker.
 Compare brokerage rates. Every broker charges you a certain fee for processing your
orders. Some may charge more, some less.
 Some give discounts on the basis of the amount of trades conducted. Take all this into
account before opening an account. However, remember that it is not necessary to choose a
broker who charges the lowest fees. Good quality brokerage services provided often may
need higher-than-average charges.
 Next, get in touch with the brokerage firm or broker and enquire about the account
opening procedure. Often, the firm would send a representative to your house with the
account opening form and the Know Your Client (KYC) form
 Fill these two forms up. Submit along with two documents that serve as proof of your
identity and address.

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 Your application will be verified either through an in-person check or on the phone,
where you will be asked to divulge your personal details.

Once
processed, you will be given your trading accounts details. Congrats, you will now be able to
conduct trades in the stock market

HOW TO TRADE USING DEMAT ACCOUNT?

STEP 1:
Link your trading and demat accounts. This way you won’t have to keep supplying your
demat account details for every transaction.
STEP 2:
Place an order through your online trading account. This could be a market order, a limit or
buy order, or an after-market order. If your brokerage allows you to place orders through the
phone, then you will need to supply your trading account details.
STEP 3:
The exchange will process your order. It will verify the details of the transaction, the market
price, the availability of the shares in the market, and so on. It will also check the details of
your demat account that is linked to your trading account. This is especially so in case of a
sell order.
STEP 4:
Once the order is processed, the shares will be either deposited in or debited from your demat
account.
CAN YOU TRANSFER SHARES USING DEMAT ACCOUNT?
 Nomination: Yes, nomination is possible. You can have a nominee of your choice by
filling up the details in the account opening form. This enables the nominee to receive the
securities after the death of the holder of the demat account.
 Between DPs: Transfer of shares is possible between demat accounts held with
different DPs. You need to fill the Delivery Instruction Slip Book (DIS) and submit the same
to your DP for transferring your shares from another demat account. However, you need to
check whether the central depositories are same or not (CDSL or NSDL). If both of them are
different, then you need an INTER-Depository Instruction Slip (Inter DIS). If they are same,
then you need an INTRA Depository Instruction Slip (Intra DIS).
Do try to submit that DIS when the market is on. Then, the date of submission of DIS and
date of execution of DIS would be the same. Otherwise, there may be a delay. You may also
need to pay the broker some charges for the transfer.

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BENEFITS OF DEMATERIALIZATION ACCOUNT

• Safety: If we are holding our shares, bonds etc in physical (paper) form, there are chances of
its theft, mutilation, and loss. Moreover, we are also exposed to the risks of fake papers, bad-
delivery or delays at the time of transfer of physical securities. However, in DEMAT
accounts; we can preserve our long-term investments safely and securely.
• Convenience: When we want to sell our dematerialized shares or redeem our debentures in
DEMAT account; there are no hassles of filling up transfer forms, sending redemption
requests or any other messy, costly and time-consuming paper work. We can conveniently
transfer our securities through electronic transfers or just by signing one 'Delivery Instruction
Slip', which nothing but our chequebook is for DEMAT Accounts.

CONCLUSION
Based on this paper notwithstanding many problems, Indian stock market has emerged as a
significant financial intermediary, assisting efficient resource allocation, providing strong
support to Indian economy and help investors to realize the benefits of stock market
investing. This has happened due to the tendency to avoid risk, inability to understand future
market development and changes in investor preference. The absence of product
diversification and a confused market situation has been made more by the absence of an
innovative marketing network. Online is considered as one of the innovative network. The
product range offered by stock broking firms needs to be redesigned to cater the changes in
the short term, medium term and long term savings and investment markets. Management is
considered to be a key for the operational efficiency of any business venture.

REFERENCE
 M. Karunakar& S. Saravanan (May 2008) “Impact of Micro-Finance, “Southern
Economists” Vol. 46, page No.37- 39.
 Mrs. ArchanaSinha (July 2008) “Micro –Finance” Vol. 35 – No. 7, page No. 33
(Courtesy: Decan chronicle).
 N. Mukudan& M. HilariaSundari, “Emerging Dimensions in Online trading ; Micro
Finance in India”, Dominant publishers and distributors New Delhi 110002.
 www.bseindia.com
 www.nseindia.com
 www.moneycontrol.com
 www.equitymarket.com
 www.demat.com

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