A demat account is the digital locker that makes equity investing possible in India. It holds shares safely in electronic form, lets you apply in an IPO, and enables buying or selling on the exchange without paper. If you are new, think of it as the hinge that connects the first sale of shares. This article breaks down the two routes and shows how they meet in the same locker.
What Is An IPO? What Is The Secondary Market?
Understanding IPO
An IPO (initial public offering) is when a company offers its shares to the public for the first time. You apply during a fixed window, funds are blocked in your bank, and allotment is decided later. If you receive shares, they appear in your demat account before listing. The price is indicated in advance through a band or fixed level, so your focus is on choosing quantity within the rules rather than haggling over quotes. You cannot trade those shares until the listing day, which is when normal market trading begins.
Secondary Market: Overview
The secondary market is where investors trade listed shares with one another. You place buy or sell orders through your broker, orders match on the exchange, and settlement moves securities in or out of your demat account. Prices keep changing throughout the day as buyers and sellers update their quotes. You can build positions gradually, trim them later, or sit on cash when you prefer. In short, this market is continuous and flexible once a stock is listed.
Why The Demat Account Is The Gateway
Your demat account is the one place where all listed securities are credited and debited. It links to your trading account and your bank account, which together form the rails for both routes of participation. Without this link, an application remains incomplete, and a market trade cannot be settled. Three ideas make the locker central to your process:
- Proof of ownership, since your name on the account mirrors the company’s share register.
- Safe custody, because entries are electronic rather than paper certificates.
- Low-friction delivery, since allotments and trades move in and out automatically.
The same locker also carries corporate actions, such as dividends, splits, and bonus shares. That makes record-keeping easier, because you see everything in one consolidated view rather than scattered files.
IPO vs Secondary Market: A Side-by-Side View
| Topic | IPO | Secondary market |
| What it is | First public sale of new shares | Ongoing trade in already listed shares |
| How you join | Submit an application during a window | Place buy or sell orders during market hours |
| Price | Indicated by a band or fixed level | Discovered continuously through orders |
| Timing | Apply, wait for allotment, then listing | Immediate order execution when matched |
| Certainty | Allotment can be partial or nil | Fill depends on matching, size, and price |
| Liquidity | Starts at listing | Available day to day |
| Documents | KYC, bank link, demat account details | KYC with trading and depository account linkage |
| Money flow | Funds blocked first, debited on allotment | Funds or shares move on trade settlement |
| Primary risk | Demand risk and listing swings | Market volatility and execution risk |
| Best for | Applicants who want listing participation | Investors who prefer flexible entries and exits |
The Journey Of Shares In Each Route
When you apply for an IPO
- Choose quantity within the rules and confirm the demat account details.
- Approve an online block of funds in your bank.
- If allotted, shares credit to the locker, funds are debited, and you can trade after listing. If not allotted, the block is released.
When you trade in the market
- Place a buy order, it matches, and shares credit to the locker after settlement.
- Place a sell order, the available quantity is checked, shares debit on settlement, and money comes to your bank.
What A Good Setup Should Offer
Look for features that make both paths smooth and low-friction.
- Clean onboarding with accurate demat account credentials and simple KYC.
- Reliable linking between the bank, trading, and the locker so applications and trades flow correctly.
- Clear corporate-action updates that automatically reflect in holdings.
- Timely statements and alerts for credits, debits, pledges or releases.
- Simple nomination so benefits pass smoothly if required.
- A consistent portfolio view on mobile and web for quick reconciliation.
- Support for online application flows for public offerings without physical forms.
- Easy portfolio reports for basic record-keeping, not as advice.
Costs And Practicalities In Each Route
- In the public offering route, funds are blocked first and charged only on allotment. You typically see platform or statutory charges when you sell later. Exact levies vary by participant and by regulation, so read your statements.
- In market trading, brokerage and statutory charges apply on execution. Contract notes and account statements tell you what moved and why. Reconcile these regularly so you stay in control of your records.
Checklists You Can Use
Before applying in an IPO
- Match your name and demat account number exactly as registered.
- Ensure your bank supports online blocking for applications.
- Read the basic risks, price band, and timetable.
Before trading in the market
- Enable two-factor authentication for broker and locker access.
- Start with limit orders for disciplined entries.
- Reconcile holdings in the locker with your broker’s portfolio tab.
- Review statements monthly as good hygiene.
Common Mistakes To Avoid
- Typing errors in account details during applications. Use auto-filled data where possible and double-check before submitting.
- Forgetting that blocked funds reduce usable balances until allotment is final.
- Mixing up roles. The trading account places orders, the demat account stores securities, and the bank moves money.
- Ignoring corporate-action messages that explain changes in quantities or cost bases for your records.
Building A Simple, Repeatable Process
- Open and verify a demat account, trading account, and bank linkage with full KYC.
- Practise placing one clean application online and tracking it to credit or release.
- Create a monthly review that checks statements, alerts, and nominations.
- Keep contact details updated so credits, debits, and messages reach you on time.
Final Word
An IPO and the secondary market look different, yet both meet at the same destination, your demat account. Use the locker as your anchor, keep records tidy, and approach each route with patience and clarity. With that foundation, you can participate in India’s listed markets in a steady, low-stress way that suits your temperament.
