Demat account: What is short selling and how does it work? MintGenie explains

livemint.com:

If you've watched the 'Scam 1992' series, you might remember the scene on short selling, where Harshad Mehta's character describes the process of selling shares in the stock market without actually owning them.

Investors often confuse the concept of short selling as the process looks tricky and involves selling shares that one doesn't actually own. However, this strategy is often employed by experienced investors in the stock market, particularly during periods of declining stock prices.

It enables investors to profit from downward price movements by selling borrowed shares at a high price and then repurchasing them at a lower price to return them to the lender.

Also Read: Can I convert my single demat account into a joint account?

This practice allows investors to capitalise on market volatility and generate returns irrespective of whether the market is bullish or bearish. In this article, let's delve into the concept of short selling, its benefits, and how to implement short-selling strategies both with and without a demat account.

Engaging in the stock market involves two distinct activities: trading and investing. Trading entails frequent buying and selling of shares to capitalise on stock price fluctuations, while investing involves purchasing company shares to become a shareholder, participating in the company's growth, and potentially earning capital gains through stock appreciation and dividends if the company is dividend-paying.

To undertake these activities, you require both a trading account and a demat account, which can be opened with a depository participant.

Also Read: What are the latest features available in demat accounts?

Demat Account: A demat account serves as a secure repository akin to a bank