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What is the NAV applicable when I buy mutual funds today?

Is it yesterday's NAV or today's or tomorrow's?

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Arpit Chandak

Net Asset Value or NAV is the fund’s market value per unit. It is the total value of assets being managed in a mutual fund divided by the number of units of the mutual fund. Mutual funds collect money from investors and invest in various investment vehicles such as stocks, bonds, etc. The sum total of the current value of all the assets (stocks, bonds, etc) and the cash they have is called Asset Under Management or AUM. As the price of stocks changes with time, total value of AUM changes and as a result NAV varies.

                    NAV= (Total AUM) ÷ (Total Number of Units)

If an investor is willing to invest in mutual funds, the amount required is the NAV of the fund multiplied by the number of units purchased by the investor.  For example if person A owns 10 units and person B owns 20 units, the amount paid and profit or loss accumulated by the person B will be double to that of person A. NAV of a fund is calculated on the basis of the closing prices at the end of the trading day.

A person can invest in mutual fund on any business day of the year, but one may or may not get the same day’s NAV. It could be yesterday’s, today’s or tomorrow’s NAV. It depends on the time you submit your application and transfer the money to the fund house. This time is known as cut-off time in a mutual fund and it differs for different types of funds.

Cut off timings for types of funds:

Type of funds - Cutoff timing

Liquid funds - 2 pm

Equity funds - 3 pm

Debt funds - 3 pm

Liquid funds: The cut off timing for liquid fund is 2 pm. If an investor submits the application and transfer funds before 2 pm, he gets the NAV of the previous day. If he fails to transfer before 2 pm, NAV of the same day on which amount is received by the fund house is applicable.

Equity and Debt funds: The cut off time for both equity and debt funds is 3 pm. If an investor submits  the application before 3 pm, he get the NAV of the same day and submitting it after 3 pm will make him eligible for the next day’s NAV. For these type of funds, transferring the amount before cut off time is not required. The only exception to the above mentioned rule is that if investment amount is more than Rs. 2 lakh, both the application and transfer should completed before the cut off timing.

Cut off timings are not important to investors planning for long term or starting with a small amount but it matters to individual investing large amount of money. Even one or two percent change can bring a lot of difference to these investors.

In India, people do attach a lot of importance with the NAV of a mutual fund. If you are planning to invest in mutual funds, NAV shouldn’t be paid much attention to. The other factors such as Asset Under Management (AUM) size, past performance, alpha, beta and other financial factors should be given importance.

aniket

NAV or the Net Asset Value of a mutual fund is the cost at which a single unit of the mutual fund can be bought by an investor. It is equivalent to the MRP of any product. If a mutual fund has an NAV of Rs.500, then that is what the investor will have to pay to acquire one unit of that mutual fund. Conversely, if an investor decides to invest Rs.20,000 in a mutual fund whose NAV is Rs.500,then that investor will be allotted 40 units of that fund.


The NAV of any mutual fund is calculated and revised at the close of every trading day. However, the NAV of the mutual fund, that is the price you will have to pay to acquire a unit in the fund, depends on the time of submission of application as well as the time of making the payment. Accordingly, although you can invest in a mutual fund on any business day of the year, you may not always get the same day’s NAV.


There are separate rules for calculation of NAV for Liquid Funds and Equity or Debt Funds.

If you want to invest in Liquid Funds, the cut off time is 2pm contingent on both, having placed the application as well as transferring funds to buy units in the mutual fund before 2pm. If both these conditions are met, then the investor will be allotted units of the scheme at the NAV of the previous day. SEBI mandates that both the application form as well the payment should be completed before the cut off time of 2pm. Therefore, it is advisable to undertake the transfer using Real-Time Gross Settlement (RTGS) or National Electronic Funds Transfer facility (NEFT).


If you want to invest in Equity or Debt Funds, the cut off time is extended to 3pm. However, investors investing under Rs.200,000 need to only place the application and not actually transfer funds to the fund houses's account to be able to purchase/sell units of a mutual fund at the previous day's NAV. However, it is pertinent to note here that if the investor wishes to invest more than Rs. 200,000, then the cut off timing rules will apply as per the timing when the amount gets deposited in the fund house's account.


Though it is good to know the cut off timings, where the amount to be invested is small, missing out on buying/selling units of the mutual fund at the desired NAV should not be a cause of worry. Because Mutual Funds are meant for long term investment, a day's difference here and there should not make a large difference. However, where the amount to be invested is huge, the NAV does play a signifcant role in the decision making criteria for purchase/sale of units.

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
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