SEBI (Securities and Exchange Board of India), the market regulator in India, has issued a circular that asks all mutual fund houses to stop collecting any entry load (usually 2.25%) from all investors who invest directly with the fund house, via the internet or the fund house’s office/collection center.
This is effective from Jan 4th, 2008.
The exact modalities of how this will get implemented by various fund houses remains to be seen. So if you were planning to make some mutual fund investments in the next few days, hold on for a week or two, and ask the fund house for clarification on the process if you want to save on the entry load. If you use any bank’s demat or investment account you will still be inviting an entry load even though you are not going through an agent or broker. It pays to be wise and double check the process first.
I personally think you should be doing your own research and avoiding any broker recommendations. There is a wealth of information online to aid in the research. Value Research Online is an excellent resource that I use all the time.
Update: I was at a HDFC Bank branch today and asked them about this. The person I talked to said SEBI has removed all entry loads whether you buy through an agent or not. If you read through the SEBI circular it says SEBI is not abolishing entry loads everywhere. Clearly there is confusion in the system and not everyone is on the same page!
Update 2: I learnt today that the ‘Know Your Customer’ (KYC) rules state that even if you are allowed to invest in a mutual fund completely online, the mutual fund house still has to physically verify your PAN card before you invest. That throws a spanner into a pure online investing process. My recommendation would be to invest in mutual funds online through your bank’s netbanking site. Since the bank has verified your PAN there is no need to go through the verification process again and you can do it all online. Infact I did exactly that, a few days ago.