Understanding the Role of a Demat Account

A dematerialised (demat) account acts as a digital storage for securities, including stocks, mutual funds, and exchange-traded funds (ETFs). It eliminates risks associated with physical share certificates, such as theft, loss, or damage. Additionally, any benefits like dividends or interest are directly credited to the account when distributed by the issuing company.

In India, two depositories are registered with the Securities and Exchange Board of India (SEBI) to hold financial securities:

Central Depository Services (India) Limited (CDSL)
National Securities Depository Limited (NSDL)

What is a Trading Account?

A trading account is necessary for conducting transactions on stock exchanges like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). It acts as a bridge between an investor's bank account and demat account, enabling them to buy and sell securities.

Key Differences Between a Demat and a Trading Account

How a Demat and Trading Account Work Together

The stock market ecosystem functions through an interconnected system of three accounts: trading, demat, and bank. When an investor buys shares, the trading account places the order, the bank account facilitates the payment, and the demat account holds the shares. When selling, the trading account executes the sale, the demat account transfers the shares, and the proceeds are credited to the bank account.

For example:

If an investor buys 100 shares at ₹100 each, the trading account places the order, the bank account processes a payment of ₹10,000, and the demat account receives the credited shares.
If the investor later sells 50 shares at ₹110 each, the trading account executes the sale, the demat account debits the shares, and the bank account receives ₹5,500 after settlement.

Importance of Both Accounts

Both a demat and a trading account are essential for stock market participation. Without a demat account, holding shares in electronic form is not possible, and without a trading account, buying and selling securities cannot be executed.

A seamless trading experience depends on choosing the right platform. The MO Riise app by Motilal Oswal offers a fully digital account opening process, enabling investors to set up a demat account in just 15 minutes. The platform also provides market research, advanced charts and indicators, multiple order types, and fast order execution, making trading efficient and accessible.

Investors looking for a smooth and reliable way to trade can explore the features of MO Riise and get started with stock market investing today.