Direct plan investors in mutual funds get more heft after Sebi move

Instead of transacting through MF houses, they can buy and sell direct plans from the exchanges

Direct plan investors in mutual funds have a good reason to cheer. Market regulator, the Securities and Exchanges Board of India (Sebi), allowed investors to purchase and redeem mutual funds (MF) units directly from the stock exchange platforms. This means that high net worth individuals and others who have done their research can directly buy, say five schemes of different fund houses from the exchange platform directly instead of having to go to their respective websites.  

The stock exchange platforms – BSE Star Mutual Fund and NSE NMF II – are very popular for purchase and redemption of mutual fund units. The BSE Star MF processed over 1 million transactions worth Rs 1,075 crore in a single day in February. This move is likely to give them more boost. Says Gaurav Rastogi, Founder & CEO, Kuvera.in: “The latest step further prods investors to go for direct plans of mutual fund houses. We already use BSEStarMF for our transaction processing. So the better the exchange infrastructure gets, the better it is for the industry overall.”

 A number of options: As of now, when it comes to buying MFs, you can either go through the regular route or direct route. The former is a tad bit expensive as the MF distributor earns a commission for selecting the scheme and helping you with the transaction. For the latter, you could either go to online portals like Kuvera.in, Paytm Money, Groww and the like. There are also registrar and transfer agents like CAMS and Karvy, Mutual Fund Utilities – an aggregation platform owned by several asset management companies, launched by the Association of Mutual Funds of India (AMFI). Swapnil Kendhe, a fee-only RIA says: “Now, investors can get investments consolidated at one place, without the help of any intermediary.”

Kendhe so far prefers CAMS app, which allows direct plans without use of any intermediary, and thinks the stock exchange platforms would be the right choice too. CAMS has a service that allows you to invest via systemic investment plan (SIP) and also lumpsum amount.

As far as Mutual Fund Utilities goes, it allows you to invest in as many as 38 fund houses out of the total of 44 asset management companies in India. It also provides Robo-advisories through a customised portfolio using algorithms and technology. However, for several Robo-advisors and free transaction platforms, they have a slightly earlier cut-off time to qualify to get the same day’s net asset value (NAV). Reason: They deal with exchanges, who collect these order and send them to the registrar and transfer agents.

In other words, theirs is an additional step. Robo-advisory is a good option when you need help investing for financial goals like retirement, but don’t want or can’t afford a complete life financial plan. Your advisory needs changes over time and these platform handles that and provides the right guidance at the right time. As far as the latest stock-exchange platforms they will let you invest in MF till the official cut-off time, and hence get the same days NAV. But you won’t get any customised readymade portfolio suggestion.

Currently, several registered investment advisors are already using the stock exchange platforms to buying, selling MF as well as setting SIPs, systemic withdrawals plan, systematic transfer plans and others. The same facilities will be now available for direct investors. Ganesh Ram Head BSE Star MF says: “This is expected to provide a level-playing field to exchange MF distribution platforms vis a vis MF Utility.”

Keep in mind, when it comes to direct MF investments, they are not suitable for first-time investors, as market volatility can force such investors to churn or withdraw their investments. As a result, they risk losing long-term compounding potential of their investments.