If you wish to invest in the stock markets,the first step you must take is to open a demat account as physical trading of shares has become almost non-existent. A demat account offers many advantages. If a security that is held in dematerialised (demat) form is transferred,you dont have to pay a stamp duty (which you would have to if the security was held in physical form). The transfer of shares gets speeded up when held in demat form,and that enhances the level of liquidity in the markets. Delays,theft,interception and misuse of certificates,all of which happened in the case of physical shares,get eliminated.
In our country there are two depositories National Securities Depository Ltd (NSDL) and Central Depository Services Ltd. These are the organisations that hold your securities in custody for you in demat or electronic form. In addition,there are a large number of organisations that are affiliated to either of these depositories and function as their agents. These are called depository participants (DPs). You have to open a demat account with one of the DPs. Most large banks and many large brokerage organisations function as DPs.
According to Ashish Kapur,chief executive officer,Investshoppe India,The key point to keep in mind while choosing a DP is easy access: their office should be close to your office or residence. And two,the service standards must be good: if you have a complaint,somebody at the DPs office must listen to it and resolve it.
Some (but not all) of the documents that you may be asked to submit at the time of opening the demat account to provide proof of identity,employment and residence are as follows: PAN card,voters ID,passport,ration card,drivers licence,photo credit card,employee ID card,IT returns and electricity/landline phone bill. The originals of these documents may be required at the time of submission for verification. (Do remember to state on the photostat copies the purpose for which you are submitting them. Also put your signature on these copies. These precautions will help prevent the misuse of these documents.)
DPs charge you an account opening fee,an annual account maintenance fee,custodian fee,and transaction charges. The rates vary from one DP to another,though not too drastically. A few private banks waive the account opening fee. The transaction fee is charged for crediting and debiting securities to and from your account. Some players levy a flat charge on every transaction. In case of other DPs,it depends on the value of the transaction,subject to a minimum amount. If you are a day-trader who trades frequently,you may be able to get lower (than standard) rates from some DPs.
The DP will provide you with a unique Beneficial Owner Identification number (BO ID) which you need to quote for all future transactions.