Indian retail investors are increasingly bypassing intermediaries to invest directly in mutual funds, driving assets under management for these plans to nearly ₹7 trillion. This trend is fueled by the lower costs of direct plans and the convenience of digital platforms. While retail participation in direct plans has grown, corporate and institutional investors continue to prefer regular, commission-based distribution channels.
A major shift is taking place in the Indian mutual fund industry as retail investors move away from commission-based distributors toward direct investment plans. As of March 2026, assets under management (AUM) held through direct plans surged to nearly ₹7 trillion, compared to ₹1.6 trillion five years earlier. This movement indicates that individual investors are becoming more cost-conscious and tech-savvy, opting for methods that reduce the fees paid to intermediaries.
At the core of this change is the cost advantage. Direct plans do not pay commissions to agents or distributors, which generally results in a lower expense ratio—the fee a fund charges to manage the money. Over the long term, these savings can enhance the net returns for investors. The share of retail assets in direct plans climbed to 36.7% by March 2026, up from 21.4% five years ago, according to data tracked by the Association of Mutual Funds in India.
Digital platforms have acted as the primary bridge for this transition. These apps and websites have simplified the process of buying, selling, and tracking funds without needing to visit a bank branch or meet an advisor. In the 2026 fiscal year alone, direct plans added 25.2 million new accounts, showing a faster pace of growth compared to the 14.2 million additions in the regular distribution channel.
However, this shift is not universal across all types of investors. While individuals are embracing self-managed portfolios, corporate and institutional investors are moving in the opposite direction. These groups have increased their reliance on regular plans, which often come with the service, documentation support, and advisory layers that large entities require. As of March 2026, nearly 29% of corporate assets were held in regular plans. This difference highlights that while individual investors prioritize cost savings, institutions often value the service-heavy models provided by traditional distributors.
Investors should also consider the broader risks associated with this trend. Market volatility has been a significant factor, with global economic conditions and interest rate policies affecting asset valuations. Because retail portfolios have become more sensitive to equity market movements, any sharp correction can impact the total value of these direct AUM holdings. Furthermore, regulators like the Securities and Exchange Board of India (SEBI) continue to update compliance rules for mutual fund schemes. Investors managing their own portfolios must ensure they stay informed about these regulatory changes, as they no longer have a distributor to manage compliance or provide guidance during market downturns. As the industry evolves, the key for investors will be balancing the benefit of lower costs against the need for disciplined investment management in a fluctuating market.