Yes, you can have as many demat/trading accounts that you want, but you can’t have them with the same broker/DP. So if you have one trading account with Zerodha or 1 demat with ILFS, you cannot open another one with Zerodha/ILFS, but you can go out and open with others.
The disadvantage which such a thing is that you will have to keep track of two accounts, login to two separate trading platforms, separate P&L statements while filing your taxes and all.
You can link the same bank account to multiple trading accounts.
When you buy shares, you can send the shares to the same demat through multiple trading accounts. But while selling, you will be able to do so only through 1 trading account, the account for which you have the POA mapped with the demat. POA is required to debit shares online when the shares are sold.
Yes you can open multiple Trading Accounts (not with a single broker) and multiple demat accounts (not with a single DP), no restrictions on that. Also, one demat a/c can be mapped to multiple trading accounts, no issues.
Advantages of two or more Trading a/c’s: NOT MUCH, may be little bit of reduced brokerage and/or different trading platforms (depends on your individual taste/likeness)
Advantages of two or more Demat a/c’s: NOTHING
Disadvantages of two or more Trading a/c’s: You have to bear account opening charges, you have to keep track of activities in two or more trading a/c’s.
Disadvantages of two or more Demat a/c’s: You have to bear annual maintenance charges of Demat a/c’s whether you use it or not, you have to bear the charges (approx. Rs. 500/- or so yearly, depending on the DP)
As per me, it does not really make sense to open multiple trading a/c’s and demat a/c’s.
One advantage of multiple Demat account is that your counter party risk is diversified.
When you BUY a security, the following things happen.
Say Monday (T) you issue a trade say 100 INFY @1000 each - so your trading margin account is debited by 100000. This money now sits with the broker. Your trading account shows that the seucirites are alloted to you but not delivered. Its like uncleared bank balance for banks. You can see it but cannot withdraw it. If the broker goes bankrupt, the exchange guarantees delivery - but upto 15 lakhs. So having multiple Demat accounts are useful if you have more than 15 lakhs in demat.
At T+1, Nothing happens. Whatever is the PnL of the INFY share gets accrued to your total value of your trading account.
T+2, at 01:30 the exchange takes the money and delivers the shares to the broker pool account or directly to your demat account depending on the technology available with the broker.
When you SELL a security,
Say Monday you own 100 INFY @1000 each amounting to 100000. If you sell this, the margin account is immediately credited with 100000. But you cannot withdraw this cash as this is margin and not real cash. The broker themselves have not received cash yet. The broker then immediately debits (thats why they need a power of attorney from you) your demat account and moves the securities to the broker’s pool account. If the broker goes bankrupt at this stage, then the exchange stands in between - but then you have to wait for the bankruptcy process to complete (usually months if not years), till your assets are paid in part or full. Your margin goes to zero as your sold securities in the pool account of the broker is attached in the bankruptcy process. You are in trouble and stuck.
T+2 - nothing happens
T+3: At 10:50 the exchange sweeps the broker pooled accounts for the sold stocks via that broker and credits the cash at 1:30 which is as described in the BUY section above.
Mainly you should consider 3 things when choosing a broker.
Balance sheet size. The broker has to have a balance sheet of atleast 100 times the total of all demat accounts for that broker. Zerodha for FY16 is about 200 cr. ICICI direct is about 1700 cr. This gives you an indication of the size. You can get this information directly from MCA website (company registration site) or on some broker comparison sites.
Technology and flexibility of online/offline options
Costs. They should always be minimized. The safety of the broker is not when the broker is more costly but its on the reputation and size of the broker.
So - it makes sens to open multiple demats if your account value is more than 15 lakhs. Bottom line.
One of the benefits of having two demat is that you do not have to worry about FIFO share debit rule.
For eg. If you are swing trader or if you want to sell the share in short term then share will be debited in First in First out order.
But FIFO rule is applicable to only one account so if you have two demat accounts then you can pick one account for long term and keep another for short term trade for same scrip.