One of the main reason for me to keep it in folio is to keep my MF holdings Platform agnostic and not introduce single point of failure in MY MF investments.
With MF in folio mode, I am still connected to AMC and continue to have multiple ways to transact in that folio. Tomorrow, if I don’t like the platform I am using for transaction, I can simply move all my holding to some other platform or start investing through AMC/RTA website without any friction.
On the other hand, having MF in demat means you are locked to platform and need to rely on it. Moving your investments is painful and need lot of effort.
There is already an old thread which lists out other issues, but for me not having to depend on a specific platform is major reason.
Most Brokers including Z offer e-DIS via CDSL transfer and if you keep these options then its not painful. Today in the day, if i place transfer units in cdsl (online), they are reflecting the day after in console in the other demat account. Applies to shares as well.
No paperwork / physical form etc. Some Brokers dont charge for trx in Z its 0.03% + tax