One needs a demat account to hold financial instruments in electronic form. These accounts are maintained by depository organisations like NSDL and CDSL in India. Just like a bank account holds your money, a demat account holds your shares or securities in electronic form. It is important to know that a Demat Account is only mandatory for investing in stocks and other securities.

To make the transactions seamless and convenient, a trading account and a Demat account are required. The Demat account is a repository of your financial securities but is not enough to trade. For transacting, you need to have a trading account with a brokerage house