Corporate actions are events that occur in a company that may affect its stock price or other securities. These events can include stock splits, mergers, acquisitions, or dividend payments. As an investor, it is imperative to understand how these actions affect your investments. This is especially true if you hold your investments in a Demat account.
A Demat account is an electronic account that allows you to hold securities in digital format. In India, the Securities and Exchange Board of India (SEBI) introduced the Demat account system to encourage paperless securities trading. The Demat account system has revolutionized securities trading in India, making it more secure, transparent, and efficient. You know this when you explore how to open a demat account, don’t you?
As an investor with a Demat account, it is imperative to understand how corporate actions affect your investments. For example, if a company announces a stock split, it means it divides each existing share into multiple shares. This can make the stock more affordable for investors and may lead to an increase in demand and the stock price. However, it is imperative to note that a stock split does not change the overall value of your investment.
In the case of a merger or acquisition, a company may be merged with or acquired by another company. This can impact the value of your investment in the company, as the newly acquired company may have a different business focus, management team, or financials. It is imperative to keep an eye on news related to the companies in which you have invested. This will enable you to stay updated about any mergers or acquisitions that may affect your investments and then know how to open demat account?
Another corporate action that can affect your investment is a dividend payment. When a company announces a dividend, it means it distributes a portion of its profits to its shareholders. Investors who hold shares in the company on the record date of the dividend payment are entitled to the dividend. The dividend can be paid out in cash or in additional shares.
As an investor with a Demat account, it is paramount to ensure that your Demat account is updated with your latest address and contact information. This is so that you can receive timely communication about corporate actions related to your investments. You should also keep track of the record date for dividend payments. You should ensure that your Demat account holds the required shares on the record date to receive the dividend. Then you should know how to open demat account.
The process of transferring securities to legal heirs or nominees after the death of a Demat account holder is known as transmission. This process can be initiated by the legal heirs or nominees by submitting a transmission request form to the depository participant (DP) along with the necessary documents such as the death certificate of the account holder, a copy of the will, and relevant identification and address proofs of the legal heirs or nominee. Once the DP verifies the documents and approves the request for transmission, the securities are transferred to the account of the legal heirs or the nominee.
