A direct plan's NAV ends up higher than the same scheme's regular plan because a regular plan pays a distributor commission that a direct plan doesn't — that extra cost is deducted from the regular plan's NAV every day, so it grows slightly slower.
Why does a distributor commission affect NAV?
Both plans of a scheme hold the exact same portfolio and run under the exact same fund manager, but each is priced by its own expense ratio — the annual fee the AMC takes out of the fund's NAV every day. A regular plan's expense ratio is higher because it has to cover the distributor's commission; a direct plan's is lower because there's no distributor to pay. Since that cost is deducted daily, the regular plan's NAV compounds a little slower every single day it stays invested.
Does the gap get bigger over time?
Yes. A small daily difference in expense ratio adds up the longer the money stays invested, so the NAV gap between a scheme's direct and regular plan usually widens the older the fund gets — it isn't a one-time difference.
Does a higher NAV mean the direct plan performed better?
Not in the sense of being a "better" investment — a direct and regular plan of the same scheme hold identical assets, so the NAV gap between them is pure cost, not extra performance. Comparing NAV across two different schemes to judge which is cheaper or better doesn't work at all — see What does NAV mean? for why NAV isn't a performance score.
Do I need to compare this on Rupeezy?
No. Every mutual fund you buy on Rupeezy is already the fund's direct plan, so you never pay the distributor commission this article describes. See What are direct mutual funds? for what that means for your investment.
Things to keep in mind
- The NAV gap only holds between the direct and regular plan of the same scheme — comparing NAV across different schemes still tells you nothing about which is better.
- A regular plan isn't a worse fund, just a costlier way to buy the same one.