Rachana Ranade. Blog

What is a Demat A/c?

Demat A/c is simply short for Dematerialized A/c. Its purpose is to hold all your Financial Securities in an electronic form, eliminating the need and hassle of physical handling of securities and related documents.

There are 2 depositories in India, namely National Securities Depository Ltd (NSDL) & Central Depository Services Ltd. (CDSL). These depositories hold all the securities in our Demat A/c, in order to offer efficient trading and settlement in the markets. For this, we must open a Demat A/c with a broker (also known as a depository participant) recognized by SEBI.

Just like we have a Bank A/c to keep our cash, we need a Demat A/c to store our securities in an electronic form.

Today, I am going to share my story of how I opened my Demat A/c with Zerodha. There are 2 ways through which this is possible: offline & online. I opened my a/c online; however, I will quickly walk you through the offline process as well. So, let’s begin!

a) Offline account opening

First, you need to download the application forms from their website. Take a printout, fill it up, sign it and send the application to Zerodha via courier at the address mentioned on their website.
After this, you should schedule a meeting with a Zerodha representative who will complete your in-person verification. The representative will guide you with all the documents needed and take signatures wherever necessary, to complete the account opening process. Right now, all of this might take more time than before due to the pandemic. However, you can open an account online as I did. How? Let’s find out...

b) Online account opening

Before I started with the process, I ensured to keep a scanned copy of my PAN card, Aadhar, signature, and canceled cheque/bank statement in the device from which I was opening my account.

Step 1: Mobile Number & Email verification

I visited the Zerodha website and clicked on the “Sign up” section to start my account opening procedure. The first step was mobile number verification wherein I had to enter my number. After I hit the ‘Continue’ button, I received a 6-digit OTP number which I had to key in on the screen.

Next was email verification. I entered my email id and received a 6-digit OTP in my mailbox. I entered it and pressed continue.

Step 2: PAN verification

For this step, I had to enter my PAN and DOB as per my PAN. The portal asked me to pay a sum of Rs. 300 as an account opening fee. Various payment options like UPI and Net banking were available for the same. I had to fill in all the necessary bank details to complete the payment.

Step 3: Digilocker

After the transaction was successful, the Zerodha portal redirected me to the “Digilocker” window. Digilocker is an online locker wherein we can keep our government-issued documents in an electronic form. I had to separately sign in for Digilocker with my Aadhar, so Zerodha could access necessary documents uploaded in the locker.

Step 4: Personal Details

This step was very simple. Here, I just had to enter my personal details like Name, occupation, trading experience, and bank details carefully.

Step 5: Webcam IPV

For In-person verification (IPV), all I had to do was give my webcam access to Zerodha, write the code flashed on the screen on a blank paper, hold it up to the camera and click a picture. I had to save this picture as my IPV and move ahead with e-signing.

Step 6: E-sign

E- signing was done by uploading my PAN, Aadhar, Income Proof, and signature which I kept handy before starting the process. A Digio dialog box appeared on my screen for registration with the NSDL. I verified my email again. After this, I could see my complete form, check everything, and click on ‘Sign now’.

Voila! I successfully applied for opening a Demat A/c. Within 24 hours I received a mail from Zerodha with a PIN to activate my account. I was instructed to Log in using the same and change my password immediately and that was all.

Isn’t opening a Demat a/c easy peasy lemon squeezy? So, hurry up and click the link below to open your Demat A/c today!

Click the following image to read about financial markets.

It is close to the month-end and you realize you need to go for your monthly shopping. Let’s say you need to get some snacks, fruits, clothes, personal care products, stationery, and utensils but you don’t have the time to go around the town visiting different shops for different items. Where would you go? Supermarket! A supermarket would be like your one-stop solution for all the things you need.
Now, think of the Indian Financial Market as a supermarket, where all kinds of financial assets/instruments can be bought and sold. Would you like to know more? I got you! In today’s blog, we will be understanding what is a Financial Market. Who are the market participants? Why is it important? and What is the structure of the Financial market in India? So, let’s get started!

What is the Financial Market?

I guess the name suggests itself. The Financial Market is a marketplace, where buying and selling of various financial asset/instrument take place. The financial assets being traded in this market can be stocks, bonds, currencies, commodities, etc. It brings together the buyers and the sellers who are interested to trade in a particular instrument. So, the stock market, bond market, forex market, commodities market, and any other market trading in financial instruments together, fall under a single umbrella, which is the Financial market. These markets operate in a proper structure but, more on that later.

Who participates in the Financial Market?

Participants include investors (institutions, individuals, government, etc.) wishing to invest in various investment avenues, entities /governments wishing to raise funds, financial intermediaries (exchanges, brokerages, banks, mutual funds, etc.) and regulatory bodies (RBI, SEBI, etc.).

What is the importance of the Financial Market?

Enables smooth circulation of Funds :

The market participants continuously interact with each other. Thus, funds flow efficiently from investors to businesses/government and vice versa.

Encourages people to invest :

Various financial instruments like stocks and bonds have given better returns than traditional options like FD’s or Savings. Improved transparency, proper regulation and rising financial literacy in India have ultimately encouraged people to trust and earn good returns by investing in markets.

Reflection of economic growth :
I think the 2008 crisis would be the best example to understand this point. The financial market and economic growth go hand in hand. The performance of financial markets is reflected in the strength of the economy.

Structure of Indian Financial Market

The Financial market in India is divided into Money Market and Capital Market.

1.Money Market :
It is a marketplace where short-term borrowing and lending of funds take place. This happens through various money market instruments with maturities ranging from a day up to a year. Banks usually use money market instruments to borrow money and meet their short-term liquidity requirements as per RBI guidelines. Types of money market instruments include T-bills, Certificate of Deposits (CD), Commercial papers (CP), Money market MF, etc. Individuals and institutions invest their excess or idle funds in these instruments and earn interest in a short period.

2.Capital Market :
In simple words, the Capital market is a marketplace where funds can be raised by businesses and governments for more than a year. These raised funds are utilized for their plans and growth. Interested investors can lend their surplus funds to earn good returns. This happens via various capital market instruments like stocks, bonds, etc. So, the Stock market and the Bond market comes under this umbrella. If you want to understand what bonds are, you can check out my YouTube video.

The Capital market is further divided into Primary markets and Secondary markets.

Primary Market :
It is a marketplace where companies and the government raise funds for the long term by issuing shares or bonds for the first time to the public. Because of this, it is also known as the New issue market. Here, the transaction happens between a buyer and the company/government issuing the security. When a company comes up with an IPO (Initial Public Offer), it takes place in this market.

Let’s take the example of Happiest Minds IPO. Investors who applied for the IPO had to go through the Primary market. To do so, they submitted their bid price to the company via their brokers. Later, the investors who got the allotment in this IPO received the shares directly from the company via their brokers again.

Secondary Market :
It is a marketplace where already-issued securities from the primary market are bought and sold. Hence, it is also known as the after-market. Here, new securities are not created, unlike the primary market. Trading and investing take place in already existing shares or bonds. A company or government is usually not involved in the transactions. It purely happens between a buyer and a seller through exchanges

Let’s continue with our previous example of Happiest Minds IPO. There might have been so many investors who were interested in the company but did not get the allotment. Also, there might be investors who got the allotment but want to sell their shares. So, these investors will now buy and sell their shares when the company gets listed on the stock exchanges. This is nothing but the secondary market. Once the company is listed, buyers and sellers can trade in these shares on the stock market.

There’s a lot more to learn about the primary and secondary market. If you are keen on learning what exactly goes around in these markets and how they work in detail, you can check out my course “Basics of Stock Market” at the link below.

BASICS OF STOCK MARKET COURSE

Bottom line:

Our Indian financial market has come a long way since Independence. It has opened up so many options for us to invest in and to take advantage of growing businesses and the national economy. It’s always a better idea to understand the overall structure and operations of the Financial market before we make trading or investing decisions.

Click the following image to know what is Nifty and its calculation.

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