Yes, you would need to allocate funds for trading in mutual funds. Allocation of funds can be done in two ways:
1. You would need to place a Bank Hold request by following the path Trading-> Limits-> Get Bank Balance. Here you need to input the amount and click on Hold.
2. At the time of placing a purchase request, you would be able to view 'Online Hold Request' screen displaying the shortfall of funds and you have to request for bank hold from this screen for completing the transaction