With the growing popularity of financial markets, they are attracting more and more individuals. The equity market being the most popular, a large number of people invest their savings in the stock market. If you are a novice trader or investor, you might be wondering whether a demat account can be opened without the assistance of brokers. In this article, we will assist you in clearing your doubts about opening a demat account.

Let us first understand whether brokers are required to open a demat account? Types of brokers?

Are Brokers Required to Open a Demat Account?

A stockbroker or broker is an organization who is a registered member of the stock exchange and are given license to participate in the securities markets on behalf of their clients and charge a commission for this service.

Any individual in the Indian stock market can purchase stocks through a demat account only. The demat account can be opened with various brokerage firms in the market. Therefore, for opening a demat account, you need a broker. These brokers charge commissions on every trade their clients execute as a percentage of each trade executed.  The image below shows the trading cycle.

Types of Stock Brokers

Now, there are two types of stock brokers in India:

1. Full-service brokers
2. Discount brokers

While buying or selling shares there are a number of charges involved such as brokerage charge & STT etc. Brokerage charges depend on whether you did intraday trading or delivery.

• When you buy & sell a share on the same day, then it’s called Intraday trading.
• When you buy a share and these shares are delivered to your demat account, then it’s called a delivery.

Full-Service Brokers

They are traditional brokers who provide trading, research, and advisory facility for stocks, commodities, and currency.Examples of full-time brokers are ICICIDirect, Kotak Security, HDFC Sec, Sharekhan, Motilal Oswal etc.

• They also facilitate investing in Forex, Mutual Funds, IPOs, FDs, Bonds, and Insurance.
• They provide 3-in-1 accounts (Saving+demat +trading)
• They have a large number of branches in different cities. And also provide customer service.
• In general, a full-service broker charge between 0.01% – 0.50% brokerage charge on Intraday and delivery.

Discount Brokers

Discount brokers just provide the trading facility for their clients.  They offer low brokerage and a decent platform for trading in stocks, commodities and currency derivatives. They do not offer advisory. They suit a ‘do-it-yourself’ type of clients. A few examples of discount brokers are Zerodha, RKSV, Trade Smart Online, Achiievers, SAS online etc.

• They do not provide 3-in-1 accounts (Saving+demat +trading). You have to transfer money to your trading account.
• They do not have many branches in different cities and have online customer support.
• The discount brokers charge a flat fee (fixed fee of Rs 10 or Rs 20 per trade) on intraday and delivery trading. There are also a couple of discount brokers who do not charge any fee on delivery trading.

Which type of broker you should choose?

The answer depends on your knowledge, money and time.

If you want stock advisory for your investment, then you should choose a full-time broker. On the other hand, if you want to do research on your own or you have a financial advisor, then you should choose a discount broker.

You should also consider brokerage charges carefully before selecting your stockbroker.

Take an informed decision while opening a demat account. If you are looking to open a demat account with a reputed broker, you may consider Kotak Securities. The company is well known for offering affordable and hassle-free premium services.

How to Open Demat Account

Let us now learn about how to open a demat account.

• Select the depository participant with whom you want to open a demat account. Financial intuitions and brokerage firms provide this service.
• Fill the demat account opening form and submit the necessary documents.
• A copy of rules and regulations will be provided to you covering the terms of agreement and charges.
• In-person verification would be carried out during the process. The staff of the depository participant will contact you to confirm the details provided by you in the account opening form.
• After confirming and processing the details, you will be provided with a demat account number.

Let us now learn about the documents that you must submit while opening a demat account.

Documents Required to Open a Demat Account

• Proof of Identity (PAN card, voter’s ID, passport, Aadhaar card, driving license, etc.)
• Proof of Address (Ration card, passport, Aadhaar card, voter ID card, driving license, bank passbook or bank statement, etc.)
• Proof of Income
• Proof of Bank Account (Cancelled cheque)
• PAN Card
• 1 to 3 passport size photographs

Only after submitting the above-mentioned documents to the broker, you can open a demat account.

Before opening a demat account, you must also look at various factors like charges, services of the brokers, customers support services, etc. Take an informed decision while opening a demat account. Which factor did you consider for opening a demat account?