Mutual Funds

Your Fund Portfolio

Anand Kalyanaraman | Updated on June 07, 2020

If I buy a mutual fund online at, say, 11 am, what would be the NAV for purchase? Would it be the preceding day’s closing NAV? If I make this purchase at, say, 9 pm, would the same day’s closing NAV be applicable?

AR Ramanarayanan

Determination of the NAV depends primarily on three factors: a) the type of fund — liquid/overnight fund or other fund (other than liquid/overnight fund), b) the type of transaction — purchase (subscription) or redemption, and c) the time of transaction.

Note that due to the disruption caused by the coronavirus-related lockdowns, market regulator SEBI has changed (reduced) the cut-off timings for determination of the NAV with effect from April 7, 2020, until further notice.

Below are the NAV determination rules that are in force now (and the rules that were applicable until April 6).

For liquid/overnight funds

The cut-off time for purchase from April 7 is 12.30 pm (earlier, it was 1.30 pm). The cut-off time for redemption from April 7 is 1 pm (earlier, it was 3 pm). If the application for purchase of a liquid/overnight fund is received up to the cut-off time (12.30 pm currently), the closing NAV of the preceding day will be applicable.

If the application for purchase of the liquid/overnight fund is received after the cut-off time, the closing NAV of the same day will be applicable.

If the application for redemption of the liquid/overnight fund is received up to the cut-off time (1 pm currently), the closing NAV of the same day will be applicable. If the application for redemption of the liquid/overnight fund is received after the cut-off time, the closing NAV of the next day will be applicable.

For other funds

The cut-off time for purchase from April 7 is 1 pm (earlier, 3 pm). The cut-off time for redemption from April 7 is 1 pm (earlier, 3 pm).

If the application for purchase of the fund (other than a liquid/overnight fund) is received up to the cut-off time (1 pm currently), the closing NAV of the same day will be applicable.

If the application for purchase of the fund is received after the cut-off time, the closing NAV of the next day will be applicable.

If the application for redemption of the fund (other than a liquid/overnight fund) is received up to the cut-off time (1 pm currently), the closing NAV of the same day will be applicable. If the application for redemption of the fund (other than a liquid/overnight fund) is received after the cut-off time, the closing NAV of the next day will be applicable.

Difference

Note the difference in NAV applicability between liquid/overnight funds and other funds. For purchase of liquid/overnight funds, the NAV of the previous day will apply if the application is received until the cut-off time (12.30 pm currently), and the NAV of the same day will apply if the application is received after the cut-off time.

But for purchase of other funds, the NAV of the same day will apply if the application is received until the cut-off time (1 pm currently), and the NAV of the next day will apply if the application is received after the cut-off time.

Fund availability

For purchase transactions in liquid/overnight funds (any amount) or in other funds (of ₹2 lakh or more), the above rules hold good if there is fund availability for the purchase before the cut-off time. If the funds are not available, a) the applicable NAV for liquid/overnight funds will be the closing NAV of the day preceding the day the funds are available, and b) the applicable NAV for other funds will the closing NAV of the day the funds are available.

Response to query

Based on the above, below are the responses.

If you buy a liquid/overnight fund at 11 am (say, on June 3), the closing NAV of the preceding day (June 2) will apply, and if you buy it at 9 pm (on June 3), the closing NAV of the same day (June 3) will apply.

If you buy another fund (other than liquid/overnight fund) at 11 am (on June 3), the closing NAV of the same day (June 3) will apply, and if you buy it at 9 pm (on June 3), the closing NAV of the next day (June 4) will apply.

If you invest through a distributor, the cut-off time laid down by the distributor could be earlier than that laid down by SEBI.

Send your queries to mf@thehindu.co.in

Published on June 07, 2020

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