Holding units in physical form just means that you don’t need a demat account. They are still electronic and are managed in a paperless way by the Mutual Fund, Registrar and Transfer Agency.
Avoiding a demat account saves you thousands of rupees in long term costs (annual maintenance, opening fees etc). Using a good online direct mutual fund platform you can transact online in all mutual funds, without a demat account and in the ‘physical form’.