10 Ways How Dematerialisation made Indian Markets Safer

Dematerialisation of shares has totally revolutionised the Indian share market in the last 2-3 decades. Retail investors are opening their demat account in significant numbers in India, as they can easily manage their investments in an electronic form.

Before dematerialisation, investors had to keep paper certificates for their investments, which posed many challenges. For example, certificates could get stolen or damaged. Besides, it used to take a lot of time to transfer the ownership of shares. Compliance was an issue because it was quite difficult to track the movement of physical shares.

With dematerialisation, such issues are a thing of the past, as the market has become a lot faster, efficient, seamless, and transparent than what it used to be in pre-demat days.

Learn how dematerialisation has made investing safer:

1. Dematerialisation has totally done away with paper certificates: Dematerialisation of shares has totally done away with paper certificates. A demat account holds all your securities in an electronic form. Hence, you do not have to keep paper certificates for your shares.

2. Zero risk of share certificates getting stolen or damaged: Investors keep all their securities in a demat account. Hence, there is no risk of certificates getting stolen or damaged.

3. No risk of your signature getting forged or mismatched: In earlier days, there was a risk of your signature getting forged. Moreover, there were instances of a signature mismatch. Such risks have been totally eliminated by dematerialisation of shares.

4. No mistakes in settlement: It is thanks to dematerialisation that India has been able to move to T+2 rolling settlements. As shares are bought, sold, and settled entirely in demat mode, physical certificates have become a thing of the past. Hence, the whole process is error-free and without any hassles.

5. Duplicate share certificates are not possible due to dematerialisation: In the times of paper certificates, several duplicate certificates of even large companies were seen in the market. Investors found it hard to tell the original from duplicate certificates. However, fake certificates are almost impossible now due to a strong audit system in dematerialisation. 

6. Efficient monitoring of your portfolio: Thanks to dematerialisation, you can easily track all your investments by logging into your demat account. Earlier, you had to manually keep record of your investments and then call up your broker to know their value, which was cumbersome.

7. Seamless connection between your demat and bank accounts: Once you link your demat account with your bank account, you can buy and sell shares easily. When you sell securities, in a seamless manner, an amount is credited to your bank account. Conversely, your bank account is debited when you buy securities. Paper certificates did not allow such a seamless transfer of funds.

8. Improved the confidence of investors: Many small investors were not keen to participate in the stock market in pre-demat days due to the risks associated with paper certificates. Due to demat shares, more investors are now participating in the share market, which increases the liquidity, thereby making the market safer than earlier.

9. Less risk of market manipulation: In pre-demat days, as shares were in the form of paper, large investors could control the delivery of shares to manipulate the market. However, in post-demat days, shares exist in an electronic form. Hence, they are transferred efficiently and seamlessly, which has reduced the risk of manipulation by a great margin.

10. Better regulation: Physical certificates used to make it difficult for the regulators to control and track their movement. But, dematerialisation has made regulation better, as tracking movement of securities in their electronic form is much easier than tracking them in a physical form.

Conclusion

There is no denying that dematerialisation has transformed the way people used to invest. However, as dematerialisation has made investments safer and convenient, people should not invest carelessly. Hence, before opening your demat account, you should learn how to analyse securities thoroughly and then begin your trading journey.