In this article, we will discuss a very basic topic, where to open demat account? We will try to provide basic and elementary information on this subject of demat a/c. In fact this is the most basic subject for a newcomer who wants to start trading or investing in the stock market.
We have many options while we try to find out the answer to this basic question, ” where to open demat account? “ There are many big names, medium names or even small names who are offering the demat service. There are many stock brokers, there are many banks, who are offering this service. Nowadays, brokers are of two types. Few are full-service brokers, i.e, they charge high brokerage but offer personalized service to the clients. Full-service brokers keep dedicated relationship managers for the clients, provide trading calls and good trading platforms for them. On the other hand, few brokers are discount brokers, they charge low brokerage, but the service may be limited. Discount brokers are much like low-cost airlines, who are flying you in the same destination like full-service airlines, but provide limited service while on board like they will not provide complimentary food etc.
So, there are many options in the big cities. In small cities may be the option can be a little limited, still, in the age of the internet, even small towns have many options. So let’s discuss what are the basic things to consider while choosing a trading account provider. Let’s discuss where to open demat account and also discuss pros and cons of different service providers. We enter the stock market for profits, this initial step can be a major decision as we as a trader or investor must be in a win-win situation after choosing a trading and demat (T&D) account.
Previously also we discussed that this T&D account is the first and foremost thing we need to open if we want to enter the stock market. This is exactly like a bank account if anyone wants to save his money in the bank. In the bank, a/c our money lies while in demat a/c, our stocks lies. So choosing a T&D account is of utmost importance. We must choose the best bank or best broker who will provide us the best demat account with more facilities at the lowest cost.
So we understood that nowadays there are so many options that a newcomer can open a T&D account in many places and there is a wide choice. There are many institutions or even your bank can approach you to open A T&D account. Let’s check a case study. Ravi wants to open a trading and demat a/c but he is confused about where to open demat account. He has a bank account at ICICI Bank. His bank already has approached him to open a trading a/c with their broking wings named as ICICI Direct. Ravi checks that the brokerage charges in his bank is too high. He needs to pay very high brokerage for buying and selling once he starts trading.
Like ICICI Bank, other banks like HDFC Bank, Kotak Bank, Axis Bank all provide this service to their clients and all have the issue of high brokerage charge. Previously people used to work in the bank’s trading account, but nowadays there are many other options. Why should Ravi pay a high brokerage when he has many other options? Rather he can approach a stockbroker, who is not a bank and open a trading account, where he needs to pay much lower brokerage. In fact, the brokerage charges with a stockbroker can be as low as 5% of that charged by a bank. So Ravi discards the idea of opening his demat a/c with ICICI Bank.
The only advantage of opening a trading account with a bank is that time to time banks give higher margin to the traders. And another advantage can be that the investor sometimes feels a sense of safety, that his money is lying in his own bank account. But these benefits cannot compensate the high brokerage the banks are charging.
Where To Open Demat Account For Lower Brokerage?
Before finding the answer to this question, let’s ask another question, why brokerage is so important for Ravi in trading or investing? There are 2 options in trading or investing, either Ravi can make a profit or Ravi can make some loss. If Ravi makes a profit of Rs. 1000 his actual profit will be Rs. 1000 – brokerage and if he makes a loss of Rs. 1000 his actual loss will be Rs. 1000 + brokerage. So if the brokerage becomes high it can severely affect the profitability of a trader and investor.
Ravi has many choices while choosing a broker. There are Sharekhan, Angel Broking, Edelweiss, Motilal Oswal, Nirmal Bang and many others in this field. He can approach any of these brokers for the opening of his trading account. All will give them a relationship manager, trading terminal like ODIN or Nest Trader etc and also accepts trading over the phone. Many of these brokers also have local franchise offices even in small towns, where Ravi can go and sit in their offices for offline trading. The brokerage will be decided on the volume and turnover of Ravi’s trading. So if he trades more, the brokerage will be more. So still there is an issue, brokerage cant is controlled if you are trading on high volume.
The third option for Ravi is to open an account with any discount broker. The discount brokers will allow Ravi to trade unlimited for a fixed brokerage. Like few brokers offer to trade any quantity for a brokerage of as low as Rs. 20. So this is the best option for traders trading big volumes as the brokerage part almost become zero in this case. Discount brokers also have zero brokerage plans for investors. For low volume traders, they charge as low as 1 paisa brokerage per 100 rupees trading volume. Few discount brokers are Zerodha, RKSV, Samco, Trade Smart Online etc. These brokers mainly have their setup online and so they can offer to trade at so low brokerage. See the image below to understand how Rav can save brokerage with a discount broker account.
So, before reading this article, Ravi was confused for where to open demat account? But now he has a clear choice of opening account with a discount broker. He can even find best facilities among discount brokers. He can compare their trading terminals and charting platform and then finally take a call. Zerodha has a robust trading platform called Zerodha Kite and we recommend opening an account with Zerodha. Another broker, RKSV offers a free demo of Upstox Pro, their trading platform. To register your name for trading and demat account opening click here.