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You can hold mutual fund units in the demat form also

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You can now hold your mutual fund units in a demat form, in the same way you hold your shares. The benefit of this is that it will enable you to get a single consolidated statement for your holding across shares and mutual funds. 

You can buy mutual funds through the stock exchange on either the National Stock Exchange ( NSE) or Bombay Stock Exchange ( BSE). To start with, you need to register with your existing stock broker by filling up a two-page form as mandated by the regulator. Once that is done, mutual fund units can be bought through your broker the way you buy and sell shares. Once you buy them, you can hold them in your demat account in the same way you hold your shares. 
You can also redeem your mutual fund units the way you sell stocks – by placing an order through the stock exchange platform. Subsequently, you can submit the delivery instruction slip to your depository participant (DP) to transfer the mutual fund units, the same way you submit it for shares. 
However, buying mutual funds through the stock exchange has its flaws. Firstly, your broker could charge you a fee for buying mutual funds, and, secondly, you will have to pay an annual fee for maintaining your depository account and charges for every transaction that you do. 
If you are currently holding mutual fund units in the physical form, which are represented by statement of account, you can convert this statement of account into the dematerialised form. 
For converting these units, you can get a conversion request form (CRF) from your depository participant (DP) and submit it along with the statement of account to your DP. After due verification, the DP would send the CRF and statement of account to the asset management company (AMC)/registrar and transfer agent (RTA). The AMC/RTA, after due verification, will confirm the conversion request executed by the DP and the mutual fund units will be credited to your demat account.
Source: Economic Times

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