So glad you asked this question because a number of first-time investors have this doubt. Simple answer to your question is: no. It is because people get confused between mutual funds and stocks that this question has risen in the first place.

You only need a demat account if you are directly buying and selling stocks via the exchanges in the market such as the National Stock Exchange or the Bombay Stock Exchange.

Demat is nothing but a holding in financial security in the electronic form. It is not compulsory for an investor to own a demat account, but it may be useful for those investors who invest in mutual funds along with investing in stocks, as they can see all their holdings in one place.

Thus, you can buy mutual funds via a distributor, directly through a fund house's website or through your stock exchange broker.