A demat account is one of the necessary prerequisites needed to engage in trading and investing in the stock market. However, there are still many individuals who pose questions like ‘can i buy shares without demat account, can we trade without demat account, and how to invest in share market without demat account?’ If you’re among them, then this article will finally put all of those questions to rest. Let’s begin.
Before we actually get to the answer of this question. Let’s first try to understand what the function of a demat account is. A demat account is basically an electronic account that helps you store shares, bonds, debentures, and mutual fund units that you’ve bought, electronically. And considering the fact that shares and other financial securities are currently required to be in the dematerialized form, a demat account is necessary to be able to buy and sell shares on the stock market.
Let’s get back to the main question. Theoretically, yes, you can trade without a demat account. Here’s how.
When you buy the shares of a company, they get credited to your demat account at T+2 days. Which means that if you buy the shares today, you will get them in your demat account only after 2 days. Now, if you buy and sell the shares of a company on the same day (intraday trade), you won’t be receiving any shares into your demat account since you’ve already sold them. This way, you can effectively bypass your demat account completely and make use of only your trading account.
Although theoretically it is possible to trade without a demat account, practically, it is not. In fact, stock brokers generally don’t allow you to open an online broking account without opening a demat account.
One of the primary reasons for this has to do with the fact that intraday trades have to be squared off before the end of a trading session. If users fail to square off an intraday trade, the shares that they bought will be automatically delivered to their demat account. Not having a demat account will impede this process and cause unnecessary trouble. It is for this reason that stock brokers insist on opening a demat account along with an online broking account.
However, the contrary is possible. You can have a demat account without a trading account. That said, if you only possess a demat account and not an online broking account, you can only invest in IPO and cannot buy or sell shares on the stock exchange. If you’re wondering how to open a demat account without a broker, all that you need to do is approach a depository participant who is not a stock broking company.
All said and done, whether you use your demat account or not, it is always a good idea to have one by your side, just in case. And with stock brokers like Motilal Oswal, you can open a demat and trading account online for free. Get in touch with us right now and get yourself your very own demat account without having to pay any extra charges.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account