Indian investors are increasingly opting for direct mutual fund plans to reduce annual fees, as seen in the growth of long-term Systematic Investment Plan (SIP) assets. While regular plans still hold the majority of the ₹5.73 trillion SIP asset base, direct plans are becoming a preferred choice for cost-conscious investors, particularly in newer portfolios.
The trend of choosing direct mutual fund plans over regular ones is gathering pace in India. As of September 2026, direct plan SIPs held for more than five years have grown to account for 16.6 percent of such assets, a significant increase from just 6.9 percent in 2021. This movement reflects a growing preference among investors to avoid the commission fees associated with regular plans, which are paid to distributors and advisors.
Direct mutual fund plans are offered directly by asset management companies, which allows them to keep the expense ratio—the annual fee charged by the fund—lower than regular plans. For long-term investors, even a small difference in this annual fee can potentially lead to a higher final investment value over many years. This cost advantage is the primary driver behind the migration toward direct platforms.
Despite this rise, regular plans remain the most popular choice for the majority of the Indian mutual fund industry. Out of the total SIP asset base of ₹5.73 trillion, regular plans continue to hold ₹4.77 trillion. This dominance is largely because many investors still value the guidance, financial planning, and hand-holding provided by banks, wealth managers, and independent distributors. These intermediaries often help investors stay invested during market volatility, which can be a deciding factor for those who prefer professional management over self-execution.
Data shows that this shift toward direct plans is happening across various timeframes. For SIPs held for four to five years, the share of direct plans has reached 23.7 percent, up from 12.5 percent five years ago. Furthermore, new SIPs—those with a tenure of less than a year—now show a 32.3 percent adoption rate for direct plans, compared to 30.7 percent last year. This consistent growth across different cohorts suggests that direct plans are becoming a permanent feature for a segment of the market.
Since direct plans were introduced in 2013, their historical share was initially low due to the lack of long-running portfolios. As these portfolios continue to mature and the number of digital investment platforms increases, the gap between direct and regular plan assets is narrowing. Investors deciding between the two may track whether the potential cost savings of a direct plan outweigh the value of professional advisory services provided by regular plans. The next important trend to watch will be how distribution platforms adjust their models to retain investors as the direct-plan segment continues to expand.