Net Asset Value (NAV) represents the market value of one individual unit of a mutual fund scheme. Just as a stock has a market price, a mutual fund has an NAV that reflects its overall performance.
How NAV is Calculated
NAV is computed by dividing the total net market value of all underlying assets in a scheme by the total number of outstanding units issued to investors:
Example: If a mutual fund portfolio holds investments valued at ₹200 Lakhs and has issued 10 Lakh units, the NAV per unit is calculated as:
NAV per Unit = ₹200 Lakhs ÷ 10 Lakh units = ₹20 per unit
NAV vs. Stock Prices
- Stock Prices: Fluctuate continuously throughout trading hours based on real-time market buy/sell orders.
- Mutual Fund NAV: Calculated and declared once a day after market hours end, taking into account the closing prices of all underlying securities in the portfolio. Published daily on AMC websites and the AMFI portal.
How Applicable NAV is Determined (Cut-off Rules)
To ensure fairness, SEBI mandates specific cut-off timings and fund-realization rules to determine which day's NAV applies to your transaction.
Applicable NAV Timings Matrix
| Transaction Type | Liquid & Overnight Funds | All Other Mutual Fund Schemes |
|---|---|---|
| Subscription (Purchase) |
• Before 1:30 PM & funds realized before 1:30 PM: NAV of day prior to receipt. • After 1:30 PM & funds realized: NAV of day prior to next business day. • Funds realized late: NAV of day prior to realization day. |
• Before 3:00 PM & funds realized before 3:00 PM: NAV of the same day. • After 3:00 PM (or funds realized after cut-off): NAV of the next business day. |
| Redemption (Sell) |
• Before 3:00 PM: NAV of day prior to next business day. • After 3:00 PM: NAV of next business day. (Online Overnight Fund redemptions have an extended 7:00 PM cut-off). |
• Before 3:00 PM: Closing NAV of the same day. • After 3:00 PM: Closing NAV of the next business day. |
*Note: Business Days exclude weekends and money market/bank holidays.
Sale Price vs. Redemption (Repurchase) Price
1. Sale Price (Purchase Price)
The Sale Price is the price an investor pays per unit to subscribe to a mutual fund scheme.
- During New Fund Offer (NFO): Units are issued at the fixed Face Value (typically ₹10 per unit).
- During Ongoing Offer Period: Since SEBI abolished entry loads, units are purchased directly at the applicable NAV (
Sale Price = NAV).
2. Repurchase / Redemption Price (Selling Price)
The Redemption Price is the payout an investor receives per unit when redeeming or switching out of a scheme. If an Exit Load applies, it is deducted from the applicable NAV.
Example: If the applicable NAV is ₹10 and the fund charges an Exit Load of 2%:
Redemption Price = ₹10 × (1 − 0.02) = ₹9.80 per unit
Regulatory Guardrails on Redemptions
- Regulatory Floor: SEBI rules mandate that the repurchase price for open-ended schemes cannot drop below 95% of the NAV.
- Prospective Load Adjustments: Any changes made by an AMC to the exit load structure apply strictly on a prospective basis and will not alter conditions for units purchased prior to the modification date.
- Closed-ended Schemes: Units of closed-ended mutual fund schemes cannot be prematurely repurchased by the AMC before maturity (they trade exclusively on stock exchanges).