Does NRI need to move holdings from resident Demat to NRI Demat account?

No, an NRI who already has a resident Demat account and is holding securities in it that were acquired in the capacity of a resident Indian is not required to move those securities into an NRI Demat Account or PIS account.

NRI can continue to hold the securities on a non-repatriable basis even after he becomes a non-resident Indian. It means that you can hold the securities but cannot transfer its sale proceeds either in foreign currency to your overseas account or your Non-Resident External (NRE) Account. The sale proceeds would be required to be credited to NRO Bank Account. As per laws, repatriation of funds up to USD 1 million per year is allowed, along with other assets for NRIs/ PIOs.

According to section 6(5) of FEMA Laws:

A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India.

However, if you would like to make any fresh investments in Indian Stock Market, you would need NRE PIS Bank Account, NRE PIS Trading Account and NRE Demat account to trade on a repatriation basis and NRO Non-PIS Bank Account, NRO Trading Account and NRO Demat Account to trade on non-repatriation basis.

Many NRI's ask, I am an NRI (Indian origin) residing in the USA. I already have Demat & Trading account, still, I need to open the PIS account (Portfolio Investment Scheme).

The answer to this is the same as above. If you are planning to make a fresh investment on a repatriable basis, you need an NRI Demat [NRE/NRO], NRI Trading [NRE/NRO], and PIS NRE or Non-PIS NRO Bank Account. However, if you just want to keep or manage your existing holdings as resident Indian, you can continue with the resident account you already have.