Finance Info

The biggest advantage is that when you buy demat stocks, you can rest assured that there is no risk of their being fake, forged or stolen stocks as it sometimes happens with stocks held in the physical form. Moreover, in the case of demat stocks you need not worry about bad deliveries.

In the case of demat stocks there is also no stamp duty on transfer of stocks. Neither is there a complicated transfer form to fill up. As a result, an investor not only saves money but is also freed from the tedious and repetitive paperwork which invariably accompanies the buying and selling of stocks in the physical form.

The stock exchanges have now discarded the earlier concept of marketable lots, small lots, and odd lots. This became possible only because of dematerialization of stocks. Now even one stock, no matter how small the denomination or how low the stock price, can be bought or sold easily on the exchange. Demat is a big advantage for the small investor as it enables him to buy high-priced stocks in small quantities which were earlier often out of his reach because a marketable lot of high priced stocks would usually involve a fairly large sum of money. Equally, demat enables the small investor to sell his odd lots and small lots of stocks at market prices. Earlier, he would have been compelled to sell such lots at prices well below prevailing market price of the stock.

Another big advantage of dematerialization of stocks is that of nomination facility. This facility did not exist earlier in the case of physical stock holdings; the law permits individuals to file a nomination form only in the case of a depository account. Even in the case of accounts held in joint names, the filing of nomination forms is permitted. In the event of the death of any one of the joint holders, the stocks held in the joint account will be transferred to the single depository account of the surviving holder. If the surviving holder does not have a single account, then he will be required to open one in order to receive the stocks earlier held in the joint depository account. The nominee would get the stocks only in case all the joint holders die. Nomination facility is, however, not available to companies, Hindu Undivided Families, partnership firms, societies, trusts, etc.

In the case of denaturalized stocks, change in your address no longer requires your having to send separate letters to each individual company whose stocks you hold. All you need to do is to inform your DP of any change in your address, and the DP will send the new address to all the companies in which you hold stocks. Your new address is then entered into the records of the company and the concerned depository.

In the case of denaturalized stocks, bonus and rights stocks are immediately transferred to your account with the DP as soon as they become due to you without any delay. When the stocks are held in the physical form, the bonus/rights stock certificates come through the post after a considerable delay which could be as long as three to four weeks. There is also the danger of their getting lost in transit., being mis delivered by the postman, or otherwise falling into the wrong hands.