What Is NAV?

NAV (Net asset value) is the market value of a Mutual Fund unit. Mutual Fund units are traded (bought or sold) at NAV. NAV is calculated by dividing the total value of all the cash and securities in a fund's portfolio, minus any liabilities, by the number of outstanding shares.

Why Cut-Off Timings Exist?

Unlike stock markets, cut-off timings are not meant to simply restrict the purchase and sale of mutual fund units. The Securities and Exchange Board of India (SEBI) has prescribed cut off timings to determine which day’s net asset value will be applicable to your trade.

What Are The NAV Cut-Off Timings?

As per the most recent circular as on the 1st February 2021, NAV allotted depends on two factors-

1. 1. The cut-off time
2. 2. The time of realization of funds

The table below should provide an insight-

Illustrations For Transactions

1. a) Lump Sum purchase transactions - If ₹50,000 is received (time stamped) before cut-off time of 3.00 p.m. on Thursday 11-Feb-2021. And the funds are received in the mutual fund's account before cut-off time of 3.00 p.m. On 11th February 2021, the investor will be allotted closing NAV of 11-Feb-2021. However, if the funds are received in the mutual fund's bank account at say 5.00 p.m. on 11th February 2021, i.e., after the cut-off time of 3.00 p.m., the allotment of units will be done at the NAV of 12-Feb-2021. However, if the funds are received in the mutual fund's bank account at say 4.00 p.m. on Friday 12-Feb-2021, the units will be allotted at the closing NAV of Monday 15-Feb-2021 (Feb. 13 & 14 being Saturday & Sunday i.e., non-business days) In short, the units are allotted at the NAV of the business day on which the funds are received into the mutual fund account before applicable cut-off time.


2. b) SIP Transactions - Assuming an investor has signed up for an SIP transaction of ₹5,000 to be debited on 10th of every month. Hitherto, the investor would have been allotted SIP units at the NAV for 10th the month (assuming the same is a Business day) irrespective of the date on which the money was received / credited to the Mutual Fund's bank account. As per the new Rule, the investor would be allotted the SIP units at the NAV for 10th only if the money is received/credited to the Mutual Fund's bank account before 3.00 p.m. on 10th. Else, the SIP units will be allotted units at the NAV of the next business day on which funds are received before the cut-off time. In view of the above, investors are encouraged to avail electronic payment modes for remittance of funds to the mutual fund bank account to facilitate speedy fund transfers.

NAV For Switch Ins & Switch Outs-

Applications for ‘Switch In’ shall be treated as purchase applications and the Applicable NAV based on the cut off time for purchase shall be applied. Applications for Switch Out shall be treated as redemption applications and the Applicable NAV based on the cut off time for redemption shall be applied. Please see Table below.

The efficacy of various payment modes and the indicative cut-off time to get the same day’s NAV are given below. Investors may please take note of the same and choose appropriate efficient mode of payment.

Payment Modes & Their Efficacy

T = Date of application based on cut-off time

* While these 9 banks are technically enabled to provide real time credit, not all PA/AMC may be integrated with all the banks in which case the date of credit to MF account / unit allotment will happen on T + 1

Important Note: Unit allotment will be subject to receipt of funds in the mutual fund account before the applicable cut-off time (Currently, 3:00 PM)

SIP Transactions

T = SIP date

* MF / NPCI will endevaour to ensure credit is posted to MF account on the same day of debit to investor's account. In certain circumstances, due to delay at Bank's / Payment Aggregator's end, the credit to MF account may and the allotment could get delayed to T+1. Important Note: Unit allotment will be subject to receipt of funds in the mutual fund account before the applicable cut-off time (Currently, 3:00 PM)

Source- https://www.amfiindia.com/investor-corner/knowledge-center/cut-off-timings.html