Never Chase Dividends....

you are forget the tax angle.it is for some a very good tax planning at  no cost.

Yes, Mr. Shenoy. I fully agree with you. Infact, the NAV gets deducted when the dividend is paid. i.e. If NAV (cum dividend) is 12, and the MF pays 1 Re/unit dividend, the ex-dividend rate will be 11 only. So, thats not a dividend at all.
Meanwhile, in case of direct share market investments, that may not be the case. If you have carefully observed some most liquid stocks, the ex-dividend stocks may quote more than cum-dividend rates. The reason is - mutual fund and FIs are supposed to have a limit in the exposures which will be evidently recorded during book closures. Take example of L&T or Reliance. For the sake of having an option to play in the market, MFs and FIs have overexposures. During the book closures, they have to sell them and the rates fall temporarily. As soon as the book closures are over, they again take long positions and the rates rise. There is money in this play also.

Yes be careful about NAV. While investing in a mutual fund never buy when market is at it’s pinnacle and always go for established ones if you lack exposure.
Choose based on CAGR over 3 to 4 years , fund managers may be tempted to give good short term returns at the expense of long term gains as their compensation is based on returns.
Advantage of large funds are cost effectiveness.