Risk-Adjusted Performance Comparison of Direct and Regular Plan Equity Mutual Funds in India

This study provides a comprehensive comparison of risk and returns characteristics between direct-plan and regular-plan mutual funds in India over the period 2020–2024. Focusing on equity mutual funds (large-cap category) as a representative sample, the study analyzes annual returns and risk metrics to rigorously assess performance differences. Econometric tests including panel regressions with fixed effects and paired statistical tests are employed to determine the significance of return differentials. This study finds and indicates that direct plans consistently outperform regular plans in terms of returns (by approximately 1% per year on average) without taking on additional risk. Risk measures such as volatility and beta are virtually identical for both plan types, yet direct plans achieve higher risk-adjusted performance (Sharpe ratios, Jensen’s alpha, Treynor’s ratio). These results align with the expectation that lower expenses in direct plans translate into superior net returns for investors. The paper discusses the implications of these differences in the context of mutual fund distribution, investor decision-making, and regulatory objectives, and situates the findings within the existing literature on mutual fund performance and fees. All data of this study is documented, and results are presented with supporting tables, charts, and statistical evidence.