The Indian Stock markets have seen a major change with the introduction of depository system and scrip less trading mechanism. There were various problems like inordinate delays in the transfer of share certificates, delay in receipt of securities and inadequate infrastructure in banking and postal segments to handle a large volume of application and storage of share certificates .To overcome these problems physical dealing in securities should be eliminated . The Indian stock market introduced the system of dematerialisation recognizing the need for scrip less trading.

According to the Depositories Act, 1996, an investor has the option to hold shares either in physical or electronic form .The process of converting the physical form of shares into electronic form is called dematerialisation or in short demats. The converted electronic data is stored with the depository from where they can be traded. It is similar to a bank where an investor opens an account with any of the depository participants. Depository participant is a representative of the depository .The DP maintains the investors securities account balances and intimates him about the status of holdings.