To buy and sell shares in India, you need two accounts – a demat account and a trading account. They work together but serve different purposes.
Demat Account
A demat account (short for dematerialised account) is where your shares and securities are held electronically. Just like a bank account holds your money, a demat account holds your stocks, bonds, and other securities in digital form.
In India, demat accounts are maintained by two depositories – CDSL and NSDL. Your broker acts as a Depository Participant and gives you access to this account.
Trading Account
A trading account is what you use to place buy and sell orders on the stock exchange. It acts as a bridge between your bank account and your demat account.
When you buy shares, money moves from your bank to your trading account, the order is placed on the exchange, and shares are credited to your demat account after settlement.
When you sell shares, shares move out of your demat account, the sale is executed through your trading account, and money is credited to your bank after settlement.
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