Ever since SEBI introduced the direct plans in mutual funds there has been a significant rise in its assets. On top of this, the availability of online platforms has increased the popularity of direct investments.
According to the latest SEBI data, net inflows in mutual funds through direct plans is higher than regular plans. The mutual fund industry received net inflows of Rs.1.64 lakh crore through direct plans compared to Rs.1.50 lakh crore in regular plan in April-December 2016, a difference of Rs.14,000 crore. However, while no break-up is given, it is understood that institutional clients make a bulk of the direct plan investment in liquid plans.
In terms of geographical distribution of inflows, Mumbai recorded highest inflows of Rs.67,500 crore in mutual funds through the direct plans compared to Rs.60,400 crore in regular plans in April to December 2016, a difference of over Rs.7,000 crore.
The difference between inflows in mutual funds through direct plans and regular plans is more acute in Delhi. The country’s capital saw net inflows of Rs.26,700 crore through direct plans compared to Rs.16,500 crore in regular plans recording a difference of over Rs.10,000 crore.
SEBI has taken into account contribution from both retail and institutional investors. Since institutional investors have presence in metropolitan cities, the contribution in direct plans is higher in cities like Delhi, Mumbai, Chennai, Bangalore, Pune and Chandigarh. In fact, a recent AMFI data on investor behaviour revealed that institutions and corporates use the direct channel for 80% and 60% of their total transactions respectively.
However, investors in non-metro cities like Kanpur, Lucknow and Jaipur still prefer regular plan to direct plan. In addition, the MF industry recorded higher net inflows through regular plan in a few metropolitan cities like Kolkata and Ahmedabad.
Commenting on why direct investments have found favour with institutional investor and not with individual investors, Sadique Neelgund of Network FP says, “Institutional investors have in house resources to compare and evaluate funds best suited to them. Whereas, individual investors largely depend on advisors for this knowledge, leading them to go for regular funds.”
