Understanding unit allotment and NAV process

19 June 2024
3 min read
Understanding unit allotment and NAV process
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Lately, some concerns have been raised about the NAV allotment delay for Mutual Fund customers. This has created confusion and misinformation amongst customers.

In the spirit of transparency, we’d like to explain the behind-the-scenes process, which will clarify any misconceptions. 

What is NAV? 

NAV full form stands for Net Asset Value. It represents the market value per share for a particular mutual fund. NAV is calculated by deducting the liabilities from total asset value divided by the number of shares. SEBI mandates mutual funds to update the NAV by 9 pm every day. 

How is NAV allotted? 

As per a circular dated September 17, 2020, the Securities and Exchange Board of India (SEBI) stated that mutual fund units will be allotted at the NAV applicable on the day of realization of funds. 

Here, ‘realization of funds’ means that the NAV applicable on your transaction will depend on if the fund house has received your money or not. This was implemented in February 2021. 

To allow enough time for the chain of events to be successfully completed, cut-off times are applicable for various schemes, which are standard for the entire industry. More details can be found here. 

Cut-Off Timings on Groww and NAV Applicability

Type of fund

Order placement on Groww (cut off)

Payment receipt on Fund House/AMC (cut off)

NAV applicability

Liquid / Overnight

12:00 noon

12:00 noon

Previous day

Liquid / Overnight

After 12:00 noon 

After 12:00 noon

NAV of the day immediately preceding the next business day

All other funds

2:00 pm

2:00 pm

Same-day

All other funds

After 2:00 pm

After 2:00 pm

Next business day

Note:

Orders placed on Saturdays, Sundays, and other market/public holidays will be treated as orders placed on the next business day.

In some cases, when you might make the purchase before the cut-off time, but funds are not received before the cut-off time, your order is placed on the next business day. Accordingly, you get the next business day NAV.

What happens after you place a mutual fund order? 

Step 1: Order placed
When you place a mutual fund order on Groww, it is instantly communicated to the exchange.

Step 2: Payment collected
The intermediary (Groww, in this case) initiates payment collection from you via payment gateways. Note: Each payment gateway has an underlying payment aggregator where the money is collected.

Step 3: Payment transferred to ICCL
The collected money is transferred from the payment aggregator to the exchange's clearing corporation (ICCL).

Step 4: Order validated by exchange
The exchange validates your mutual fund order and the money received from the payment aggregators. If it is within the cut-off time, the exchange sends your mutual fund order information and the money to the AMC/fund house.
Step 5: Units allocated by AMC
After doing due diligence of your order, the AMC/fund house allocates units to your portfolio.

Note: The transaction is completed only after realisation of funds by AMCs. The entire process happens under the ambit of SEBI guidelines, to ensure fairness and uniform applicability of NAVs across the industry. 

What if NAV is delayed for my order?

While SEBI’s NAV allocation process runs smoothly on any given day, rare instances may occur, when NAV got delayed for a few users.

At Groww, we believe in transparency. If such a delay does happen again, you can be assured that we will keep you informed with timely updates on the app or via email, or via our official social media handles.

If you have any concerns, questions or suggestions, please reach out to us at [email protected].

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Groww Invest Tech Pvt. Ltd. (Formerly known as Nextbillion Technology Pvt. Ltd) Ltd. do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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