Direct plans of mutual fund schemes added nearly 21 million individual investor folios in FY26 (as of February), surpassing regular plans' 15 million net additions, marking only the second time direct plans have outpaced regular plans in annual folio growth, despite turbulent equity markets.
Direct plans of mutual fund (MF) schemes added more folios than traditionally dominant regular plans during financial year 2025-26 (FY26), despite turbulence in equity markets.
These do-it-yourself (DIY) plans saw nearly 21 million individual investor folio additions in FY26 (as of February), compared to about 15 million net additions in regular plans.
This marks only the second instance of direct plans outpacing regular plans in annual folio growth.
However, unlike the previous instance in FY24, the stronger growth in FY26 has come at an unexpected time.
Direct plans typically see higher investor traction during favourable market conditions, while regular plans have historically fared better in periods of volatility.
The divergence, experts said, can partly be attributed to a surge in investor interest in gold and silver exchange-traded funds (ETFs) and fund of funds (FoFs).
Gold and silver offerings by mutual funds witnessed a sharp rise in inflows and folio additions in the second half (H2) of FY26, as a rally in precious metal prices and heightened geopolitical uncertainties brought them into focus.
Folio additions are considered a better gauge of retail investor behaviour than inflows, as overall flows can be skewed by large institutional allocations.
According to experts and mutual fund officials, the relatively higher growth in direct plan folios continues a trend seen in the post-Covid period.
Direct plans, introduced in 2013, have consistently clocked higher growth rates, albeit on a lower base.
The pickup in direct plans among individual investors, they said, has been driven by ease of investing offered by fintech platforms and rising awareness of their cost advantage.
"I think the disproportionate growth in favour of direct plan is largely attributable to the reach provided by fintech platforms," said Aashish Somaiyaa, CEO, WhiteOak Capital MF.
"The 'MF Sahi Hai' campaign of the Association of Mutual Funds in India has also contributed," added Somaiyaa.
Dhirendra Kumar, CEO of Value Research, said that investors are increasingly becoming aware of the higher costs involved in regular plan.
"Investment platforms, Sebi's push for transparency, and frankly the Internet have made the cost of a regular plan visible in a way it never was before," Dhirendra Kumar said.
"Once an investor sees that number, the decision makes itself. Market volatility does not change this calculus.
"If anything, a falling market makes cost-consciousness sharper, because every basis point of expense drag hurts more when returns are lower," Dhirendra Kumar explained. Regular plans are costlier as they pay commissions to distributors.
While folio additions in direct plans grew at a faster pace than regular plans, the impact of market volatility was evident in overall investor additions.
The industry added 36 million individual investor folios in FY26 (as of February), compared to 56.2 million additions in FY25.
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Feature Presentation: Rajesh Alva/Rediff