Demat refers to dematerialized Acc..

Though Comp. is under obligation to offer security in both physical and demat mode, u have choice to receive security in either mode.

If u wish to have security in demat mode, u need to indicate name of depository and also of depository participant with whom u have depository Acc. in your application.

It is, however desirable that u hold security in demat form as physical security carry risk of being fake, forged or stolen.

Just as u have to open an Acc. with bank if u want to save your money, make cheque payments etc, Nowadays, u need to open a demat Acc. if u want to buy or sell shares.

So it's just like bank Acc. where actual money is replaced by shares. You have to approach DPs [remember, they are like bank branches], to open your demat Acc.. Let's say your portfolio of shares looks like this: I5O of Infosys, 5O of Wipro, 2OO of HLL and IOO of ACC. All these will show in your demat Acc.. So u don't have to possess any physical certificates showing that u own these shares. They are all held electronically in your Acc.. As u buy and sell shares, they're adjusted in your Acc.. Just like bank passbook or statement, DP will provide u with periodic statements of holdings and transactions.

Is demat Acc. must? Nowadays, practically all trades have to be settled in dematerialized form. Although market regulator, Security & Exchange Board of India [SEBIs], has allowed trades of upto 5OO shares to be settled in physical form, nobody wants physical shares any more.

So demat Acc. is must for trading and investing.

Most banks are also DP participants, as are many brokers.

You can choose your very own DP.

A broker is separate from DP. A broker is member of the share exchange, who buys and sells shares on his behalf and on behalf of his clients.

A DP will just give u an Acc. to hold those shares.

You don't have to take same DP that your broker takes. You can choose your own.