How to open a demat account in India, and what happens after you tap Buy

Opening a demat account takes about twenty minutes on a phone. Understanding what you just opened takes a little longer, and it is worth doing before the first order, because every charge, delay and scary-looking message you will meet later traces back to how these accounts are wired together.

Three accounts, not one

You need a bank account, a trading account and a demat account.

The bank account holds your money. The trading account is your login with a broker; it is where you place orders and it talks to the exchange. The demat account is where the shares you own are recorded. It is not held by the broker. It sits with one of India’s two depositories, NSDL or CDSL, and the broker acts as your “depository participant”, the counter through which you reach it.

The split is deliberate. If your broker disappeared tomorrow, your shares would still be sitting at the depository in your name, and you could move them to another broker. Your cash lying in the trading account is a different matter, which is why the rules now push brokers to sweep unused money back to your bank account periodically.

Demat is short for dematerialised. Until the late 1990s Indian shares were paper certificates, and a transfer meant posting them, with a signed form, and waiting weeks. The Depositories Act of 1996 replaced paper with electronic entries. Nobody misses the paper.

What you need to open one

A PAN card, which is mandatory. An Aadhaar linked to a mobile number, for the electronic KYC. Proof of a bank account in your name, usually a cancelled cheque or a statement. A photograph of your signature on white paper. A short selfie video for in-person verification, done inside the app.

Most brokers activate the account within a working day or two. If you are opening the account for a minor, or have an NRI status, expect paperwork and a branch visit.

Fill in the nomination. Everyone skips it, and it is the single form that saves a family months of grief later.

Choosing a broker

Brokers come in two kinds. Discount brokers charge a flat fee per order, often nothing at all for delivery trades, and give you an app and very little else. Zerodha, Groww, Upstox, Angel One and Dhan are the big names. Full-service brokers, usually arms of banks such as ICICI, HDFC and Kotak, charge a percentage of each trade and offer research, relationship managers and the ability to walk into a branch.

For a beginner buying shares to hold, a discount broker is almost always the sensible choice. Pick one that is large, has been around for a while, and whose app you find boring. Excitement in a broking app is a feature designed to make you trade more, and trading more is how beginners lose money.

Whichever you choose, check that the broker is registered with SEBI and is a member of NSE or BSE. Both regulators publish searchable lists. A broker that is hard to find on those lists is not a broker.

”Zero brokerage” is not zero cost

This is where people get surprised. Brokerage is only one line on the contract note you receive after every trade. The rest are taxes and levies that apply whoever your broker is.

Say you buy shares worth 10,000 rupees as a delivery trade and sell them a month later for 11,000.

Charge	Who collects it	Roughly
Brokerage	Broker	0 at most discount brokers for delivery
Securities transaction tax	Government	0.1% of value on both the buy and the sell, about 21 rupees here
Exchange transaction charge	NSE or BSE	a few rupees
Stamp duty	State governments	0.015% on the buy side, about 1.5 rupees
SEBI turnover fee	SEBI	10 rupees per crore, so a few paise
GST	Government	18% on brokerage and exchange charges
DP charge	Depository via broker	a flat 13 to 20 rupees plus GST each time you sell a scrip

Total on that round trip: somewhere around 40 to 60 rupees at a discount broker. Small on a 10,000 rupee trade. Large if you churn the same 10,000 rupees every week, which is the point.

There is also an annual maintenance charge for the demat account, between nothing and about 300 rupees a year. If your total holdings are small, SEBI’s basic services demat account rules cap it. Since September 2024 an account with holdings up to 4 lakh rupees pays no annual charge, and one with holdings up to 10 lakh pays at most 100 rupees. Brokers are supposed to apply this automatically; it does no harm to ask.

What happens after you tap Buy

You enter a quantity and a price and confirm. Your broker checks that you have the money, then sends the order to the exchange. The exchange keeps an order book for every share, a list of everyone who wants to buy and the price they will pay, against everyone who wants to sell and the price they want. When a buy and a sell match, a trade happens. For a large company this takes a fraction of a second.

The money is blocked in your account at once. The shares arrive in your demat account on the next working day, under the T+1 settlement cycle India moved to in January 2023, one of the fastest in the world. Until they arrive, the app usually shows them as “T1 holdings”. You own them; the paperwork is catching up.

When you sell, the depository asks you to authorise the debit, which on CDSL means entering a TPIN and an OTP. The cash lands in your account the next working day.

The two buttons that matter

Every app offers a choice when you place an order. One option is called CNC, cash and carry, or simply “delivery”. The other is MIS, margin intraday square-off, or “intraday”.

Delivery means you are buying the share to own it. Intraday means you are borrowing leverage from the broker to bet on the price today, and the broker will forcibly sell the position around 3:20 pm whether you like it or not. New investors should press delivery every time. If you ever find yourself pressing the other one, reread the first chapter on what a share is and ask what, exactly, you are buying.

Market orders, limit orders and the band

A market order says “buy now at whatever the price is”. A limit order says “buy only at this price or better”. For large, busy shares the difference is pennies. For thinly traded small caps a market order can fill at a price you did not expect, so use limits.

Every share has a daily price band, often 20 percent either side of the previous close, outside which orders are rejected. Some shares have tighter bands of 5 or 10 percent. If a price seems frozen on a wild news day, it has probably hit the band.

The market runs from 9:15 am to 3:30 pm on working days, with a pre-open session from 9:00 to 9:08 that sets the opening price. There is no trading on exchange holidays, which the exchanges publish each December.

Keep yourself safe

The depository will email and text you a statement of your holdings every month. Read it; it comes from NSDL or CDSL, not the broker, so it is your independent check. Never share an OTP or TPIN with anyone, including someone claiming to be from the broker. Keep your mobile and email updated, because that is where the alerts go. And ignore anyone who contacts you first with a stock tip. SEBI’s rules on who may give investment advice exist precisely because of them.

Try this before moving on

Open the account, and then buy nothing for a week. Put the three companies from the first chapter in a watchlist and write down their closing prices each evening. By the end of the week you will have noticed that the numbers move more than the businesses do. That observation is most of the Intermediate course.

Charges and settlement rules in this lesson are indicative, summarised from SEBI, exchange and broker schedules as of November 2026, and they change. Confirm your own broker’s current charges before trading.