How do you buy shares?

First, you have to open 3 Accounts to buy / sell Equity shares from the Indian Stock Market.

â€¢ Savings Bank Account (Preferably with HDFC Bank / ICICI Bank / Axis Bank / IDBI Bank),
â€¢ Demat Account and
â€¢ Equity Share Trading Account.

Savings Bank Account: Savings Bank accounts are accounts maintained by banks that pay interest but cannot be used directly as money (by, for example, writing a cheque). These accounts let customers set aside a portion of their liquid assets that could be used to make purchases while earning a monetary return. All savings accounts offer itemized lists of all financial transactions, traditionally through a bank passbook, but also through a bank statement.

Demat Account: In India, a demat account, the abbreviation for dematerialized account, is a type of banking account that dematerializes paper-based physical stock (equity) shares. The dematerialized account is used to avoid holding physical equity shares: the equity shares are bought and sold through a stockbroker.

This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for equity share trading even One equity share. As of April 2006, it became mandatory that any person holding a demat account should posses an Income Tax Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007.

Procedure:

1. Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened).
2. Deface the equity share certificate(s) you want to dematerialize by writing across Surrendered for dematerialization.
3. Submit the DRF & equity share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent.
4. After dematerialization, your depository account with your DP would be credited with the dematerialized securities.

The benefits:

- A safe and convenient way to hold securities;
- Immediate transfer of securities;
- No stamp duty on transfer of securities;
- Elimination of risks associated with physical equity share certificates such as bad delivery, fake securities, delays, thefts etc;
- Reduction in paperwork involved in transfer of securities;
- Reduction in transaction cost;
- No odd lot problem, even one equity share can be sold;
- Nomination facility;
- Change in address recorded with DP is registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;
- Transmission of securities is done by DP eliminating correspondence with companies;
- Automatic credit into demat account of equity shares, arising out of bonus/split/consolidation/merger etc.
- Holding investments in equity and debt instruments in a single account.

Required Documents:

The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings account holder has an edge over the non-account holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list (you will not need all of them though):
Income tax PAN card / Voterâ€™s ID / Passport / Ration card / Driverâ€™s license / Photo credit card / Employee ID card / Bank attestation / Income Tax returns / Electricity bill / Landline phone bill.

While they only ask for photocopies of the documents, they will need the originals for verification. You will have to submit 8 passport size photographs on which you sign across.

Equity Share Trading Account: An Account, which is used to purchase / sell of equity shares through the broker (Like http://www.icicidirect.com / http://www.hdfcsec.com / http://www.indiainfoline.com / http://www.reliancemoney.com / http://www.axisbank.com / http://www.idbi.com ).