5. Brokers, trading account and demat account
You cannot walk into NSE and buy a share yourself. You need a broker – a company registered with SEBI and a member of the exchange. Think of the broker as the entry gate to the market.
5.1 The three accounts
To invest in shares in India you need three things that work together:
| Account | What it holds | Simple comparison |
|---|---|---|
| Bank account | Your money | Your wallet |
| Trading account (with a broker) | Lets you place buy/sell orders | The shop counter |
| Demat account | Your shares, in electronic form | Your locker |
The flow is simple: money moves from your bank to your trading account, you buy shares, and the shares land in your demat account. When you sell, the shares leave your demat and the money comes back to your trading account – and then to your bank.
Most brokers today open the trading and demat account together, online, in one go.
Rahul, a 24-year-old engineer from Indore, opens an account with a broker app. He needs:
- PAN card – compulsory for investing in India.
- Aadhaar – for e-KYC and e-signing.
- Bank account details – a cancelled cheque or bank statement.
- A selfie and signature.
In about a day, his trading and demat accounts are active. His demat account gets a unique 16-digit number, called the BO ID. That number is like the address of his locker.
5.2 What does a broker do?
- Sends your orders to the exchange.
- Checks you have enough money (or shares) before the order goes.
- Gives you an app or website with charts, order screens and reports.
- Sends you a contract note – the official bill for every trade – on the day of the trade.
- Acts as a Depository Participant (DP) – the link between you and the depository that holds your shares.
5.3 Discount broker or full-service broker?
| Discount broker | Full-service broker | |
|---|---|---|
| Brokerage | Low, often flat per order | Higher, often a % of trade value |
| Advice | No advice; you decide | Research reports and relationship managers |
| Best for | People who make their own decisions | People who want hand-holding |
Neither is "better". Choose based on what you need. Just make sure your broker is SEBI-registered – you can verify this on SEBI’s website.
5.4 Charges you will pay
Apart from brokerage, every trade has small charges set by the government and market bodies: Securities Transaction Tax (STT), exchange transaction charges, SEBI fees, stamp duty and GST on fees. Your contract note shows each one. For delivery trades there is also a small DP charge when you sell.
They look tiny, but if you trade very often, they add up quickly. Always check your contract notes.
- Never share your login password, PIN or OTP – not even with "customer care".
- Turn on two-factor login.
- Check the SMS and email your exchange and depository send after every trade. If you see a trade you did not do, complain immediately.
Mera simple rule: open your account only after you finish this module. You will understand every screen of the app, every charge, and you will not panic when you see your first red number.
The demat account is your locker for shares. The trading account is only for placing orders.
PAN is mandatory for investing in Indian markets. Aadhaar is commonly used for e-KYC.
Every trade comes with a contract note showing price, quantity and all charges. Keep them – they are useful for tax too.
- You need three accounts: bank (money), trading (orders) and demat (shares).
- A broker is your gate to the exchange and must be SEBI-registered.
- KYC needs PAN, Aadhaar and bank details. Your demat has a 16-digit BO ID.
- Discount brokers are cheap and do not advise; full-service brokers advise and cost more.
- Never share your password or OTP. Read your contract notes.
- Ek line mein: Bank mein paisa, trading account se order, demat mein shares – aur OTP kisi ko bhi mat do.