An inside glimpse into what NAV means

Wondering what is mutual fund NAV in India? NAV stands for Net Asset Value, i.e. it is the value of any particular fund’s assets minus the value of the liabilities for every unit. Hence, Net Asset Value or NAV will be the following:

Value of every unit’s assets – Value of every unit’s liabilities.

This will apply for each unit of mutual funds owned by the investor. NAV helps investors work out whether any fund is undervalued or overvalued. NAV offers the value of every unit which the investor will be entitled to, when withdrawing his/her investments. For close-ended funds, i.e. mutual funds which have fixed numbers of units, the per unit price is worked out by the market. This will either be higher or lower than the Net Asset Value (NAV). It can be said that NAV is the market value for any particular mutual fund. The entire cost of any mutual fund will depend upon this value for every fund unit.

Learning more about NAV

While it is not a good decision to choose any mutual fund plan based on the NAV, you should remember that it is a crucial factor nonetheless. A higher NAV indicates the progress and good performance of investments in any particular mutual fund scheme. It may also indicate that the mutual fund plan has been active for a longer duration. Investors should focus more on returns and performance while analyzing and choosing mutual funds although the NAV does matter.

The mutual fund NAV in India is distinctly different from the market price of any equity share. NAV equates to share prices for individual stocks. You will purchase and sell off units of mutual fund plans at the NAV which prevails. The share price of a stock will fluctuate almost every minute while the NAV is worked out at the conclusion of each day of business. Every mutual fund plan, as per SEBI regulations, will have to work out and reveal the NAV post closure of markets on trading and business days. Mutual fund companies release their last and updated NAV figures on all business and working days. This is a procedure that is stringently time-bound as well. Mutual funds have a daily investment deadline, i.e. 2 PM for liquid funds or even 3 PM in case of debt or equity funds too.

You may be allotted your NAV for the same day, the earlier day or the next day as per the time of submission of funds and the application. Investing prior to 2 PM in any liquid fund means that you will get allotment of units at the NAV of the earlier day. This happens only if the money is transferred prior to the deadline in question. If you miss this deadline and submit the funds and application post 2 PM for instance, you will get unit allotment at the NAV figure applicable for the same day in question. If the application is provided prior to 2 PM but funds are transferred after the lapse of the deadline, you will not have eligibility for the NAV on the earlier day. For equity and debt funds, the same regulations apply but with a different timing in most cases, i.e. 3 PM.

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