Procedure of Purchasing and Selling Shares Through Demat Account

A demat account, or dematerialised account, is essential for modern equity trading in India. It serves as a digital repository to hold securities like stocks, bonds, ETFs, and mutual funds in electronic format. Once linked with a trading account and a bank account, a demat account allows investors to purchase and sell shares through stock exchanges with ease. In this article, we explore the complete process of buying and selling shares via a demat account — from placing an order to final settlement — and explain the systems involved in ensuring smooth trade execution.

Before understanding the procedure, it’s important to know the three essential accounts needed for trading in the Indian stock market:

Demat Account

Holds your securities electronically, maintained by a Depository Participant (DP) registered with NSDL or CDSL.

Trading Account

Acts as the interface between the investor and the stock exchange. It is used to place buy and sell orders for securities.

Bank Account

Handles the monetary transactions associated with the purchase or sale of shares. The account is linked to both your demat and trading accounts.

These three accounts work in sync to execute trades seamlessly and to settle the transactions as per exchange protocols.

The process of buying shares through a demat account involves several key steps:

Step 1: Open a Demat and Trading Account

You must open both a demat and a trading account with a registered broker or DP. Most platforms offer a combined application process. Once approved, you will receive login credentials for the broker’s trading portal or app.

Step 2: Link Bank Account

Ensure your bank account is linked to your trading and demat accounts. This enables automatic debit of purchase amounts and credit of sale proceeds.

Step 3: Select Shares to Buy

Log in to your trading platform and use the search or market watch feature to select the shares you want to purchase. You can view live prices, charts, and historical data to make informed decisions.

Step 4: Place a Buy Order

Once you’ve selected the stock, place a buy order. You can choose from different types of orders:

• Market Order: Buy the stock at the current market price
  

• Limit Order: Buy only when the price falls to or below your specified limit
  

• Stop Loss Order: Used to minimise potential losses in case the price moves unfavourably
  

Specify the quantity, order type, and settlement type (delivery or intraday).

Step 5: Order Execution and Settlement

If your order is matched on the stock exchange, it gets executed. The trade is then settled on a T+1 basis, which means the shares are credited to your demat account the next working day after the transaction.

Selling shares is the reverse of buying, and involves these steps:

Step 1: Log In and Choose Shares to Sell

Access your trading platform and go to your portfolio or holdings section. Select the stock and quantity you want to sell.

Step 2: Place a Sell Order

Choose the type of sell order (market or limit), and submit your order. For intraday trades, ensure the stock is squared off before market closing time.

Step 3: Share Debit and Funds Credit

Once the trade is executed, the equivalent number of shares is debited from your demat account, and the sale proceeds are credited to your bank account — typically on a T+1 basis.

While executing trades, it is important to keep a few practical points in mind:

• Sufficient funds: Ensure adequate balance in your bank account before placing a buy order
  

• Sufficient holdings: Check your demat account has enough quantity before selling
  

• Brokerage charges: Brokers charge fees for every trade, so factor that into your cost calculations
  

• STT and taxes: Securities Transaction Tax (STT) and other levies apply
  

• Volatility: Prices can fluctuate rapidly; use limit orders to control your purchase or sale price
  

• Settlement cycle: Though the exchange follows T+1 settlement, actual credit may vary based on your broker
  

Using a demat account for trading offers several advantages:

• Paperless transactions: Eliminates risks of physical certificates
  

• Secure and transparent: All trades are recorded and easily tracked
  

• Faster settlement: T+1 cycle ensures quick updates to holdings and funds
  

• Ease of monitoring: Real-time portfolio tracking through apps or platforms
  

• Corporate benefits: Automatically receives dividends, bonuses, and rights issues
  

Purchasing and selling shares through a demat account is a seamless process backed by technology and regulatory safeguards. By linking your trading, demat, and bank accounts, you gain access to a well-structured ecosystem that supports secure and efficient investing. As more investors turn towards self-managed portfolios, understanding the step-by-step flow of buying and selling securities is essential to make informed and confident decisions in the stock market.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.